Author: johnredwood

There is a rare agreement amidst the noise of this election. All parties agree we need to spend more on mental health services and need to do more to help those with mental health problems.

So let me pose a couple of  questions today. What initiatives nationally would make best use of additional money?  And for those of you living in the Thames Valley, what additional local facilities and staff do we most need?

There are a range of therapies that are used for differing conditions, where experience and practice can refine the approaches to seek to improve the success rate. There are drug treatments for things like depression, where the medics need to be careful not to create a dependence on drugs which becomes a problem in its own right.

I find in many of the unsatisfactory debates about public service it is often nothing other than a bidding war where £1bn is good and £2bn is much better.  Spending the money wisely should be a bigger part of the debate. Indeed we should start with what we need, and then cost it to see when and how we can afford it.

The richest one percent already pay 29% of the total income tax. Parties of the left want people to believe they can expand spending massively by getting the rich to pay more. Evidence abounds that higher rates of tax would raise less money, with more rich people leaving the country to avoid the impositions. The Labour government of the 1970s was famous for presiding over a brain drain, when UK as well as foreign born people left the UK to enjoy their earnings at a lower rate of tax.

The truth is Labour and the Lib Dems would need to increase  tax on the many to pay for their programmes. It is now fashionable to say they would only borrow to invest, so all the extra money they want to spend on the running costs of public services and benefits would need to be matched by tax revenue.

The Lib Dems have said they would put a 1p in the £1 levy on income tax, a rate rise of 5%. They would also increase Capital Gains tax. There would be a frequent flyers tax for travellers. Corporation Tax would also go up.  These measures are unlikely to raise enough to pay for their expensive programme. Labour decline to tell us how they would pay for the tens of billions extra they want to spend on investment, nationalisation and higher spending on public services.  It would clearly take a large  increase in Income Tax to pay for all they have in mind. Their proposals for higher Corporation Tax and higher wealth and higher Income taxes on the well off are unlikely to yield the extra they need.

The public is paying much more tax than ten years ago as the price of getting down the excessive deficit Labour ran up. Now the accounts are under better control it is time to relax a little. It would encourage more growth and more tax revenue to come if the government cut rates. I look forward to the Conservative Manifesto to see what tax cuts they will recommend for the first budget after the election. I will also continue to press for lower rates on income and savings . People should keep more of what they earn and have more to spend on their own priorities.

I am all in favour of a different tax regime for people who work for themselves. Such a lifestyle means that an individual depends on winning and completing business to get paid. There is no holiday pay or big company benefits when the customers dry up. The tax authorities need to treat the self employed fairly and understand the nature of their cashflows.

There are a few very well paid people who claim to be self employed but who earn their income from a single source. Here the tax authorities may well be right to challenge them and say they are effectively employees of the source of their income. Why don’t they pay National Insurance under the employer/employee scheme that applies to the rest of us with a single employer?

The wish to do this should not extend to a clampdown on many others who are genuinely self employed but may have won a decent contract which for a bit provides an important part of their income. I am pressing for reform of the IR35 rules to try to prevent it becoming a dampener on enterprise and an attack on the self employed. The PM has promised to review it. TheLib Dems have also promised a review in their Manifesto but are trying to make out they go further.

One of the more absurd claims in this election is there would be a big  bonus to share if we stopped Brexit. This is based on various false economic forecasts that claim our growth rate will be impaired by Brexit, leading to the equally false idea that if we tore up the referendum result growth would suddenly accelerate.

The UK economy performed well in the year after the Brexit vote, despite all the official and independent  forecasts of an early recession in that first year  if we voted to leave. Since then the UK economy has slowed, but by less than many other economies, as a result of a world downturn in manufacturing aggravated by a fiscal and monetary squeeze at home. The current government is now going to lift this squeeze which should lead to improvement next year.

If by a  £50 billion increase they mean   a 2% increase in the growth of GDP,  this does not suddenly become available as tax revenue. Indeed tax revenue would go up by a little under £20bn in such a circumstance. To get £50bn more tax for the state to spend there would need to be large £125bn increase in GDP, or well over 5%.

Just as the forecast of a big decline in GDP in the year or two after the vote was comprehensively wrong, so too is this forecast. As we are still in the EU with the same trading arrangements it is difficult to see how there would be anything like this fabled increase. For any company that did decide it wanted to invest more  because the uncertainty had gone there would be another company disappointed that the opportunities of Brexit had been thrown away becoming more concerned about UK investment.

As the UK adopts a better growth policy – as this government wishes to do – so investment will rise anyway. Getting Brexit done would in itself be a welcome end to uncertainty.

My least favourite tax cut is a cut in Corporation tax. The best reason to cut Corporation Tax is to increase tax income by attracting more business to the UK to pay the tax. I prefer tax cuts that boost people’s take home pay, and tax cuts that remove or reduce taxes on transactions to encourage more activity. That way more people can fulfil their dreams.

Some of you have written in to say the PM cancelled or postponed the Corporation Tax cut from 19% to 17% in order to comply with EU policy to avoid tax competition between member states. I do not believe this. We are leaving the EU and will be able to follow our own domestic policy wishes on tax once we do. There is no need for the PM to go along with guidance from the EU on Corporation Tax and I have never heard him say he thinks he needs to in his various well publicised statements on tax.

It is true the EU has considerable power over our tax policies, with detailed controls on VAT and substantial influence on Corporation Tax through various court cases and decisions. They do not have the power to set our rate, and have put up with the Republic of Ireland setting an aggressively low rate to bid business away from the UK to headquarter and pay tax in the Republic.

So the issue is why did the PM change his mind? He has been persuaded that Corporation Tax is now at a low enough level to maximise the take, and that any further cut in rate would lose revenue. The Treasury have clearly told him they think a 2% cut would cut revenue by £6bn, which is a large sum given current budget pressures to spend more on various public services.

So the issue to debate is are the Treasury right this time on their tax forecast? It may be that some in the Treasury have other views that underlie this forecast, but they are all rightly protected by the doctrines of civil service neutrality and anonymity. It is for Ministers to appraise and cross examine these forecasts to see if they are likely to be right. I would be interested in your views about whether corporation tax revenue would indeed fall were the rate to be cut a bit more?

There are too many wars. Wars happen when diplomacy fails. When wars end talking has to resume. A victor in war can lose the peace.

Wars are necessary when a bully state seeks to damage or occupy others. Such a rogue state has to be confronted and defeated if talking does not change their mind. Democracies do not usually covet the land and people of another. The great democracies of North America and Europe  have no imperial ambitions to conquer territory or use force to take over the  government of foreign lands.

The paradox is that if you want peace you do often have to arm for war. The West keeps up its military capability but rightly calls it Defence. NATO is a defensive alliance. Each member pledges to come to the aid of any member who is attacked, though each member state retains control over their individual contribution to any planned NATO action.

The West has fought in  many regional and local wars since 1945. Some would say we have intervened too often. Toppling dictators in the Middle East who were a threat to some of their own citizens and to their neighbours was not always a  good idea, as establishing a better government with local democratic consent afterwards proved difficult. Many of the conflicts followed from the dreadful attack on the USA called 9/11. The USA understandably wanted to retaliate,but got dragged into a series of wars where the forces on the ground were complex.

The UK needs to have sufficient military strength to offer protection to these islands. It does so through the power of our own independent armed forces and through our membership of NATO which  makes allied support likely in the event of a military threat. The UK also needs to be able to participate in NATO and UN approved actions with an expeditionary capability to project power anywhere in the world. Cutting defence spending or undermining the independent deterrent would reduce our capacity to see off a potential enemy, and could reduce our ability to  help our allies and make our necessary contributions as a member of the UN Security Council. The UK is right to retain control over the use of our own armed forces, with a veto over whether to join or to decline any EU military activity. The UK also needs to ensure it has sufficient control over the technology and capability to produce weapons and fighting machines in the UK.

Most of the big networks need not be monopolies. Some of you are writing in to say energy or telecoms or water rests on some natural monopoly so it is best held in the public sector. This is a double mistake.

It is quite possible to have competing supplies of water using a pipe network as a common  carrier. It is quite possible for there to be competing ways to route data and phone calls to people without having a single  monopoly network of cables. The oil and gas industries do not need monopoly suppliers because the competing businesses sometimes share pipes. The electricity industry can have competing generators and competing retail companies whilst having some regulated shared network of cables.

Nor is it true to say the state regulates a monopoly well if it owns it. It is easier for the state to be a tough and good regulator of any  monopoly elements that remain if it does not own it. As soon as ownership and regulation are confused the danger is the need to preserve jobs or generate cash or cover up for mistakes takes precedence over the correct regulatory response to poor service or damage done.

When I advised the Thatcher government on industrial strategy I always placed introducing competition above change of ownership. In the case of telecoms in the first round of arguments prior to the initial share sale the PM argued for competition but the Treasury was reluctant. The compromise only allowed for competition for business use through a single challenger. I was able to revisit this decision with Peter Lilley when we were Business Ministers and introduced wider ranging competition at a later date.

Wherever competition was introduced as into electricity and telephones service quality improved and prices fell after the event. Nationalised monopolies usually serve both customer and taxpayer badly. Labour’s ruinously expensive proposals are unlikely to bring benefits after the initial shock of the costs.