Author: johnredwood

Yesterday I  pointed out that borrowing too much, spending too much and nationalising too much had wrecked the current day Venezuelan economy. Some wrote in to say it would  be different in the UK if a Labour government tried the same here.

Well when they did it here they created similar problems. The 1940s, 1960s and 1970s Labour governments nationalised too much, spent too much and borrowed too much. In 1976 they created a financial crisis and had to go to the IMF and beg for some additional borrowings. The IMF made them cut spending and start to denationalise to raise money. In the 1960s they caused a devaluation crisis and had to slash the value of the pound to stabilise the economy.

Labour nationalised or kept in public hands trains, buses, some road freight, electricity, gas, coal,  telecoms, postal services, water, steel, some car production, aerospace,  and shipbuilding.

These great nationalised industries cost the taxpayer a fortune in subsidies as many of the businesses were heavily loss making. Many of them had to sack thousands of employees in an effort to limit losses. They often overcharged their customers by international standards, abusing their monopoly position.

They did so badly because productivity was low and capital investment ill judged. The steel industry spent huge sums on  five large integrated works that produced far more steel than the market wanted to buy. There then followed agonising debates about sacking people and closing plants.  The coal industry kept shrinking as pits became exhausted. The telecoms service fell behind  world standards. It failed to adopt  new technology to improve services and cut costs. BL allowed its car designs to lag behind popular demand and struggled to maintain volumes.

Privatising many of these industries allowed them to expand, adopt new technology and offer better service and lower prices to customers.  The magic of competition drove down telecoms and energy prices after privatisation. Suddenly people could buy a whole range of phones and other devices to add to the phone network that the nationalised monopoly had denied them. The electricity industry made a dash for gas, raising its thermal efficiency, cutting prices and reducing harmful emissions.

Mr Corbyn’s wish to go back to the past would set us back badly. It would mean much higher taxes, more borrowing, and a less good service. Labour in office usually raises borrowing and unemployment.

The leadership of the Labour party admired Chavez, the socialist ruler of Venezuela and have not rushed to condemn his successor, Maduro. Between Chavez and Maduro they have shown the world what a true socialist programme does. They have undertaken widespread nationalisation, boosted spending programmes, borrowed huge sums of money and regulated and taxed the remaining private sector.

The results have bene predictably dire. GDP per head and GDP  is down by around 40% from the peak in 2011. Oil output in the nationalised oil industry has more than halved. Inflation has turned to hyperinflation. More than 1 in 3 are out of work. There are shortages of basics in the shops.

The nationalisation of oil is an important  warning to a Labour party that seeks wide ranging nationalisation and see nationalising broadband and taxing digital companies as some kind of cornucopia they can wrestle away from the competitive sector. Venezuela saw the oil industry as a source of money for all they wanted to do. Instead they starved it of good management and of investment so today output has halved. Tankers are unable to transport more oil from Venezuela because they are not in seaworthy enough condition to pass modern maritime standards.

Labour seriously underestimates the costs of nationalising UK  broadband and grossly exaggerates how much  money it could get from new taxes on US technology companies operating here. There is not just the initial cost of partial compensation to the current owners of BT. There is also the need to pay an annual subsidy to replace the broadband charges that would be abolished, and the need to find huge sums of capital to complete the roll out of fibre optic cable to all parts of the UK to supply the capacity needed.

When we last had a monopoly nationalised industry running our phone service here in the UK you could experience a delay of six months or more in  trying to get a new phone line. You were not allowed to buy your own choice of phone to add to the network. The switching equipment was out of date and the UK was falling well  behind the USA in standards and capacity of phone system. Why would it be any different in the future if Labour had its way?  Any how much would they rob from savers who currently own BT through their Pension funds and their share based savings and insurance policies?

Under past Labour governments nationalised industries cost taxpayers a fortune in subsidies needed to keep them going. They overcharged customers from their monopoly position and they often sacked large numbers of employees. It was wisely said we did not own the nationalised industries but they owned us.

During an election political opponents have a habit of ascribing views to me I have never held and sometimes supporters attribute things to me which are also not my view. The definitive statement of my views is this site and I urge all interested in what my view is on any topic to use this site and its excellent Search facility. I have never regarded myself as responsible for the views others ascribe to me, however well intentioned.

If people want a view on a topic not covered here then I will usually be willing to help.

 

I am glad the government shares my enthusiasm for more trees. We need to keep the woodlands we still have left, and expand our forest cover. Trees enhance the landscape, help bind the soil, act as windbreaks and often improve the view. Properly tended they can also be an important source of raw material and income when harvested and replaced with saplings.

Locally our Councils are working to boost tree numbers. Nationally the government has committed to 11 million extra trees. It is making money available through both urban and rural tree funds. It is backing the Forestry Commission who have a big programme.

This work needs to be part of better planning. I am working with Wokingham Borough Council on the next local plan which I want to slow the rate of development after the substantial housebuilding of the current plan period. I want the Plan to make proper provision for green gaps between settlements, Sites of Special Scientific Interest, parks, woodlands and other amenity areas.

Many of us get a lift from our green environment. One of the best features of England is our fabled “green and pleasant land”. The mild temperate climate gives us green fields and leafy trees for much of the year which provides a good local environment close to nature. I am glad our local Councils are busy protecting and enhancing our green environment.

We also need to have a fair and controlled system of immigration. Our welcome to new people needs to be at a sustainable pace.

I see the Home Secretary is pledging to cut net migration once we leave the EU, bringing freedom of movement from the EU into the UK to seek work and related benefits to an end. Other parties in the election wish to continue with EU freedom of movement.

The numbers need working out in detail when we leave. The government will be happy to welcome students to UK universities, highly skilled workers to well paid jobs, and lower paid workers to important areas with low domestic availability of labour. There is talk of an agricultural worker scheme for example. The plan is to have a fair system for evaluating demand for Labour and eligibility for applicants.

The important thing is we can decide and control the process.There will also continue to be a fair system for helping refugees.

Total numbers need to be sustainable and give plenty of opportunity to people already legally settled here to get available jobs.

This week has brought good news that unemployment is at a 45 year low. Although slowing,  the economy is still generating additional new full time jobs. Pay is rising at 3.6%, usefully faster than price rises at 1.5%.

The combined effect  of job availability in most places with rising pay means people can afford to spend a bit more. Pressures on budgets ease when pay rises by more than prices, and when people get promotion or move to better paid jobs.

It has been a battle to get the state deficit down from the unsustainable Labour levels of 2009-10 to something we can afford. It has taken time to reduce the high levels of unemployment the government inherited in 2010.

There is nothing  wrong with some borrowing, both for individuals and for companies. Buying your own home usually entails accepting a large mortgage. 20-25 years later you own the home with no more mortgage or rent bills to come.  Buying a car with a loan or lease arrangement also makes sense as most people do not have the cost of a car in their savings account. If you have a job and a stable income the car is affordable.

Similarly successful companies can borrow to finance their stock or work in progress, or to finance capital equipment they need to produce their goods or services. A sensible level of borrowing can help their business and enhance returns for their owners.

Some query the need for the state to borrow. Under the new rules the government will only borrow for capital investment. Where the government borrows to deliver a service which the customers pay for, it can be a commercial return like any other. In most cases the state will be offering the service free to the user, paid for out of taxes. This makes evaluating the return more difficult. It does not mean there is no return or no need for necessary capital spending on roads, hospitals or schools. The government has to assess the outcome sensibly.

It is commonsense to save energy by investment in insulation and fuel efficiency in heating systems. It is a good idea to improve the fuel savings on vehicles and to find less fuel intensive ways of travelling. I am keen to see the removal of VAT from green products.

It is important to our quality of life that we protect and enhance the natural world around us. We need to protect woods and fields from development where possible, and make sure we look after the beauty of the landscape and the countryside beyond our cities and towns.

The government does run grant systems to allow people on qualifying benefits to insulate their homes with a grant, and to replace old heating boilers with modern more efficient ones. There is money available for loft insulation and wall insulation. It also makes sense for those of us not on benefits to make improvements in our own homes. Cutting the future fuel bill is a good idea. Modern boilers can be much more efficient than old ones Blocking off draughts and stopping heat leakage through walls makes sense.

We can also improve the fuel efficiency of our transport. More people are choosing to walk or cycle for shorter distances. New vehicles can be considerably more fuel efficient than older ones.

We can also cut down on food miles. One quarter of the freight miles travelled on our roads is carrying food around. Some perishable food coming long distance is flown in. If we choose more local produce or seek out the British label we can reduce the travel cost of our food and the impact that has on the environment.

Some contributors seem to think the public sector cannot add to national output or incomes. This is not true in either accounting or real terms.

A person attending a private school is paid for out of fees. Their education adds to national output. A person attending a state school has a similar education but their parents do not pay directly. It has a similar effect on national output to the private school place.   The state provision is as much output as the private sector and is paid for out of taxes.

There could be a productivity effect. If in a particular activity public sector or private sector productivity lagged then the total economic impact would be affected accordingly. In the case of schools private schools may well have higher staff ratios to state schools.

When the UK had  a lot of nationalised monopolies producing energy and transport we had an efficiency problem in those  sectors. In those cases privatisation led to an improvement in productivity, which was possible to bring about because people accepted the principle of paying for use out of their own incomes. Market pressures encouraged adoption of better technology and more efficiency.