Author: johnredwood

In the year to March 2021, the pandemic year, the UK state borrowed an extra £298bn. This was well down on the original forecasts that the state would borrow almost £400 bn extra, and well down on the budget forecasts just four months before the year end of an extra £354bn. State debt as a percentage of GDP has hit 100%, a level breached in many other advanced countries. I would normally be concerned about such a level of borrowing. On this occasion there are two large offsets which means so far it has been fine. The first is interest rates remain near zero, so the cost of servicing the debt has actually fallen despite the rise in the amount borrowed. Second ,the state is busily buying up £875bn of it. In practice therefore the state debt to GDP ratio has actually fallen to around 60%, a level which the EU and many Central Banks think is just fine.

The way out forecasts by the Treasury of much higher borrowing numbers over the last year than happened show how difficult it has proved to forecast how the UK economy would respond to the extreme damage of the pandemic polices on various sectors. It also shows the tendency to pessimism by officials. From here assuming we press on with a proper recovery and do not lapse back into closures and restrictions on business the deficit should tumble. Spending will plunge as furlough and social business schemes end, and revenues will surge as more money is spent and flows through business tills. The best way of getting the deficit down is faster recovery. That needs tax rate cuts, not rises.

As the economy recovers we should look to private business and families spending more and to public intervention less. More state spending cannot be on sufficient scale or wide ranging enough to level up most people and areas. It will take strong private sector growth in better paid jobs and more business success to achieve that. The richer parts of the country are the ones where there are more businesses and more better paid private sector jobs.

During the pandemic a Conservative government presided over a major expansion of state debt offset by a major purchase programme of that debt by the Bank of England, itself owned by the same state. This mirrored a similar exercise by  Labour and the Coalition 2008-12 to overcome the banking crash the authorities engineered in 2007-8.

It looks as if on both occasions the state has got away with it. By the end of this year The Bank o& England will own £875bn of UK government debt which is therefore no longer a debt the state owes to overseas investors or to UK savers, but to itself. Normally states cannot get away with effectively just printing money to spend because it is inflationary. In the conditions of collapsed demand both brought on by the banking induced recession and then by pandemic closures creating so much fiat money was not inflationary. Whilst the Bank observed the nicety of buying up second hand government bonds instead of just giving the new money to the government to spend, it underwrote the government borrowing at close to zero interest and has removed the need to repay the debt to third parties.

Some say the pandemic printing may yet prove inflationary. It is true that like the Great Recession printing it has proved inflationary for financial assets and houses but so far general inflation stays around target. It could get more inflationary if wrong decisions are now taken about carrying on printing and borrowing too much. This is happening in the USA where inflation is already at 5% but the Bank of England has wisely announced an end to money printing this year. There still needs to be a stronger recovery before undue  monetary tightening.

The government response to the pandemic here and in most countries around the world damaged the free enterprise parts of economies, boosted state spending and borrowing and greatly increased state control. In the next few blogs I am going to look at where this is now unhelpful and how it can be reversed as economic recovery advances and as pandemic controls are dismantled. I am conscious that some officials in government posts and most MPs in Opposition parties will see the special measures for countering the pandemic as desirable in themselves and an advance they wish to consolidate and extend . The Opposition parties have been ever keen to vote for more restrictions and more state spending, and reluctant to countenance relaxation or tapering of special financial support. There have been few voices speaking up for the many small businesses that supply so many of our needs.

Whilst people were prepared to accept direction of where they worked or whether they worked, when and where they could go out and which if any friends and family they could meet in order to defeat a killer disease, there is no reason to carry on with such draconian controls with the death rate massively down thanks to vaccines. Government should expect increasing opposition to lockdown and growing resistance to the advice on how to lead our lives. We cannot still claim to be a free society if we carry on with the very detailed controls and regulations we experienced during the various lockdowns. The first necessity is for government to reassure us we will not be going back to lockdown if cases rise again of a disease that usually now remains mild thanks to vaccinations.

The economic cost of lockdown must remain a one off for 2020-21, not a recurring scarring of our economy matched by a progressive build up of state debt. The sooner furlough is no longer needed, the sooner the labour market finds the people to fill the many vacancies there now are, the better. The remarkable thing is how many businesses are ready to go and wish to recover quickly despite all the obstacles of lockdown and the long delay in removing controls.

The EU Treaty contains the following:

Artic1e 8.1 The Union shall develop a special relationship with neighbouring countries, aiming
to establish an area of prosperity and good neighbourliness, founded on the values of
the Union and characterised by close and peaceful relations based on cooperation.
2. For the purposes of paragraph 1, the Union may conclude specific agreements with
the countries concerned. These agreements may contain reciprocal rights and
obligations as well as the possibility of undertaking activities jointly. Their
implementation shall be the subject of periodic consultation.”

The EU is very bad at getting on with its neighbours. This is despite the clear legal requirements it has imposed on itself through the Treaties to have good relations with neighbouring countries and to advance free trade with them. The EU has led Turkey and Ukraine to believe they could become full members, enticing them into signing up to very restrictive Association Agreements that have caused them problems. The EU has allowed a lot of fences and walls to b e put up from Ceuta in the west to Hungary  in the east to try to stem the flow of migrants as it struggles to control its own borders.

Since the UK left the EU and its single market the EU has gone out of its way to try to drag the UK back into membership by its excessive and unfair interpretation of the Northern Ireland Protocol. France has taken UK money to assist in stemming the people smuggling across the Channel but delivered limited results. The EU as a whole keeps sending large bills which it claims we still owe even though we are no longer members and no longer receive any money back from their general budget. Many other countries around the world have found it difficult or impossible to negotiate a free trade agreement with the EU.

The UK has been too tolerant of EU behaviour, and needs to be more independent to deliver the Brexit the majority voted for.

I thought I would reproduce the government’s statement on its Borders bill, as some of you are complaining that the government is not doing enough to stop illegal migration and some are concerned about government intentions.

The Bill will be firm but fair: fair to those in genuine need, but firm to those who break
the rules.
The principles behind the Bill are simple. Access to the UK’s asylum system
should be based on need, not on the ability to pay people smugglers; Illegal
immigration should be prevented. Those with no right to be in the UK should
be removed. Those in genuine need will be protected.
The case for change is overwhelming.
The system is broken. We stand by our moral and legal obligations to help
innocent people fleeing cruelty from around the world. But the system must be a fair
one. In 2019, UK asylum applications increased by 21% on the previous year to
almost 36,000 – the highest number since the 2015/16 European ’migration
crisis’. The current appeals system is too slow. As of May 2020, 32% of asylum
appeals lodged in 2019 and 9% of appeals lodged in 2018 did not have a known
outcome. Shockingly, the asylum system now costs over £1 billion a year to run.
The Bill – and the wider New Plan for Immigration – has three key objectives:
1. Make the system fairer and more effective so that we can better protect
and support those in genuine need of asylum. Over the last six years the UK
directly resettled 25,000 people from places of danger – more than any other
country in Europe.
2. Deter illegal entry into the UK breaking the business model of criminal
trafficking networks and saving lives. Small boat arrivals reached record levels this year, with over 3,700 people arriving in the UK this way in the first
five months of 2021. This is more than double the comparable figure for
2020.
3. Removing from the UK those with no right to be here. In 2019, enforced
returns from the UK decreased to just over 7,000 (7,192), 22% lower than the
previous year, and continuing a downward trend since 2013.
To make the system fairer and more effective, we will:
• Continue to resettle genuine refugees directly from places of danger, which
has protected 25,000 people in the last six years
• Continue to offer refugee family reunion, which has seen a further 29,000
people come to the UK over the last six years
• Meet our statutory commitment to lay in report in Parliament on the
outcome of the safe and legal routes review including family reunion for
Unaccompanied Asylum Seeking Children (not in legislation but being taken
forward alongside the Bill)
• Improve support for refugees to help them build their life in the UK, integrate
and become self-sufficient members of our society.
• Introduce a new temporary protection status for those who do not come
directly to the UK or claim asylum without delay once here but who have, in
any event, been recognised as requiring protection. This status will afford only
basic entitlements whilst still meeting our international law obligations.
• Introduce reception centres for asylum seekers and failed asylum seekers who
require support (to replace hotels) so that they have simple, safe and secure
accommodation to stay in while their claims and returns are being processed.
• Introduce a new and expanded ‘one-stop’ process to ensure that asylum,
human rights claims, and any other protection matters are made and considered
together, ahead of any appeal hearing. This will prevent repeated last-minute
meritless claims that are simply designed to frustrate proper removal. Introduce a
new legal advice offer to support individuals so that all relevant issues can be
raised at one time.
• Strengthen the law to withhold modern slavery protections from serious
criminals and those who pose a threat to national security, set out the
circumstances in which temporary leave to remain should be granted to
confirmed victims of modern slavery and clarify the decision making thresholds
for potential and confirmed victims, in line with our international obligations.
• Reform nationality law to make it fairer and to address historic anomalies.
To deter illegal entry into the UK, we will:
• Introduce new and tougher criminal offences for those attempting to enter the
UK illegally by raising the penalty for illegal entry from six months’ to four years
imprisonment and introducing life sentences for people smugglers.
• Provide Border Force with additional powers to:
o Search unaccompanied containers located within ports for the presence of
illegal migrants using them to enter the UK;
o Seize and dispose of any vessels intercepted and encountered including
disposal through donation to charity if appropriate;o Stop and divert vessels suspected of carrying illegal migrants to the UK
and, subject to agreement with the relevant country such as France, return
them to where their sea journey to the UK began.
• Increase the penalty for Foreign National Offenders who return to the UK in
breach of a deportation order from six months’ to five years’ imprisonment.
• Implement an Electronic Travel Authorisation (ETA) scheme, similar to the
USA ESTA programme, to block the entry of those who present a threat to the
UK.
To remove from the UK those with no right to be here, we will:
• Confirm that the UK may remove people including criminals to a safe third
country and declare as inadmissible those who come here from a country where
they could have claimed asylum, so that they can also be removed to another
safe country
• Introduce expedited processes to allow rapid removal of those with no right to be
here
• Introduce a power to impose visa penalties on countries that do not cooperate
on the removal of its nationals who do not have a right to be in the UK.
• Ensure that compliance with the asylum or removal process without good
reason must be considered in deciding whether to grant immigration bail.
• Increase the length of the window in which Foreign National Offenders can be
removed from prison under the Early Removal Scheme for the purposes of
removal from the UK.
• Place in statute a single, standardised minimum notice period for migrants
to access justice prior to enforced removal, and confirm in statute that a new
notice period does not need to be re-issued following a previous failed removal,
for example where the person has physically disrupted their removal.
We need to act now.

The government’s latest policy is allow us all much more discretion about how we protect ourselves and others from covid 19. Most have accepted the double dose of vaccine or will do so as the second dose becomes available for the youngest adults. This appears to have brought the death rate down massively from the two previous waves of the disease. We can all now decide for ourselves if we wish to go to events and hospitality settings with other people or not, whether we invite people to our homes or not and whether we will wear masks or not.

I would be interested in your response to these restored freedoms. Are you going to avoid busy places and public transport given the prevalence of the delta variant, or not worry as you are vaccinated? Are you going to wear a mask in busy places as a reassurance to others, or not bother as you are sceptical of the value? Are you going to want some distancing from others, or are you happy now to jostle in crowds and prop up a busy bar?

Yesterday the Minister announced he would not be changing the sensitivity of the NHS app. Do you think it is useful? Is it pinging too many healthy people? How many people do now use it all the time?

There are plenty of stories about a lack of recruits for hospitality and travel businesses reopening after lockdown, a shortage of truck and van drivers, and even shortages of people to run various types of factory. Meanwhile there are still a substantial number of people on furlough, where we need soon to find out if their jobs are safe and about to be restored or not.If some are not going to be welcomed back into full time employment now would be a good time to have that conversation so they can start to find an alternative amidst all the vacancies or set about the training needed to get into one of the scarcity activities.
Some in business want to blame Brexit for a shortage of people coming from the continent to get jobs here, a model many businesses relied on. The government has had to reveal that instead of there being around 3 to 4 million EU citizens working here as they used to tell us, there are at least 6 million now as they have applied for settled status under the new scheme. Another part of the government has also wondered aloud if there are over 1 million people in the UK from various parts of the world who are not being vaccinated for fear of it triggering an enquiry into their migration status, as they are not registered with GPs. All this implies there are a good number of people from abroad in jobs, and of course the new immigration system allows people to recruit from abroad in specified scarcity areas and for higher skilled higher paid people.
I have raised with the government the need to expand driver training and testing as they say they are now doing, given the big expansion in home deliveries across the pandemic. Wages at the bottom end are picking up a bit to send a clear signal to people already resident here that they are needed in various scarcity occupations. This should also stimulate the application of more machine and computer power to business activities to raise productivity to allow higher wages and fewer employees per unit of output. There has also in the last year or so been a welcome expansion in the numbers of people setting up new businesses or working for themselves, greatly increasing flexibility and innovation in our economy.

This week the Commons passed unanimously an important motion to sort out the issues with the EU concerning Northern Ireland. Noting that this got very little attention in the media, I need to set out here what was agreed. I assume the BBC ignored it because it did not offer them the usual opportunity to interview a lot of Remain MPs willing to slag off the UK and put the EU case. To the BBC many pro Brexit MPs speaking for the majority view are non persons unless they can be damaged by a story.

The motion stated:

“That this House
supports the primary aims of the Northern Ireland Protocol of the EU Withdrawal Agreement, which are to uphold the Belfast (Good Friday) Agreement in all its dimensions and to respect the integrity of the EU and UK internal markets;
recognises that new infrastructure and controls at the border between Northern Ireland and the Irish Republic must be avoided to maintain the peace in Northern Ireland and to encourage stability and trade;
notes that the volume of trade between Great Britain and Northern Ireland far exceeds the trade between Northern Ireland and the Republic of Ireland;
further notes that significant provisions of the Protocol remain subject to grace periods and have not yet been applied to trade from Great Britain to Northern Ireland and that there is no evidence that this has presented any significant risk to the EU internal market;
regards flexibility in the application of the Protocol as being in the mutual interests of the EU and UK, given the unique constitutional and political circumstances of Northern Ireland;
regrets EU threats of legal action;
notes the EU and UK have made a mutual commitment to adopt measures with a view to avoiding controls at the ports and airports of Northern Ireland to the extent possible;
is conscious of the need to avoid separating the Unionist community from the rest of the UK, consistent with the Belfast (Good Friday) Agreement;
and also recognises that Article 13(8) of the Protocol provides for potentially superior arrangements to those currently in place.”

So Parliament agrees with the majority in the country at last over this issue, agrees that there is no need to bring in over the top measures the EU wants which have not yet been brought in, and recommends alternative arrangements to the current EU style Protocol. The government Ministers who replied to the debate welcomed the views of those of us who drafted and backed the motion, and the Opposition parties allowed it go through without too many pro EU complaints.

To some of you the wording will be too soft, but the significance is the wording was accepted by all. More importantly the actions that follow are also clear. The grace periods on further excessive EU intervention in NI trade should be permanent as there is no need for the powers and inspections they threaten. The EU and UK should look for an alternative to the Protocol. Parliament sees that the current EU version is alienating the Loyalist community in NI and is therefore contrary to the Belfast peace Agreement. The UK proposal of mutual enforcement and continuing checks as needed away from the border makes sense. Imposing a disproportionate number of checks at NI ports on GB/NI trade makes no sense and is illegal under the Agreement,

The government was committed to protecting the integrity of the UK internal market, and has reaffirmed its commitment in accepting this motion. If there is no early success in EU/UK talks along these lines then it is clear the UK has to take unilateral action, as it is legally entitled to do as set out in the debate. The EU should stop belaying and obfuscating and see that it has at last united the UK Parliament against its view and actions.