Author: johnredwood

Confidence is a precious flower. It is easily damaged or lost. The last three years have seen the UK’s standing at home and abroad damaged by political indecision. It has been undermined by a new coarseness of language and an anger of debate by some, and by MPs in the last Parliament who promised one thing to their electors to get elected in the 2017 election, only to do the opposite once elected.

Instead of a newly independent UK  developing better trade contacts with the rest of the world whilst continuing with many links, contracts and partnerships with businesses, individuals and institutions in  the EU, the UK was dragged down by its very own Parliament. The Parliament first voted to send the letter of withdrawal  from the EU, then did everything in its power to undermine the UK government’s negotiating position in the long talks that followed. Now in this election all  the opposition parties from the last Parliament seek to prevent or delay Brexit. They wish to prolong the agony, expose the UK to a longer period of uncertainty, and strengthen the hand of the EU even more in yet more  negotiations .

A second referendum cannot unite the country behind a single course of action. The Lib Dems have already said they would ignore another  vote to Leave. Why should Leave voters accept a second referendum result in  the unlikely event that  it went the other way, when their decision to leave has so far not been implemented. For the sake of UK democracy we have to accept the result of votes.

Remain politicians have always complained about anything which undermines confidence and defers investment. They must  see it is their attempts to stop or delay Brexit further that is now the main cause of the  very uncertainty they dislike. The economy can do well from here, but ending the political  uncertainty would help.

When the new government announced its economic aim is to promote growth and prosperity it heralded a most important change. It was a change I had pressed for for several years, meeting with disapproval  from Mr Hammond.

The old government had as its main aim the reduction of  debt as a proportion of GDP. This requirement of the Maastricht EU Treaty forced the government to constrain public spending too much and to keep tax rates too high. Indeed it often encouraged Mr Osborne and Mr Hammond to impose new taxes that were economically damaging, like their Stamp Duty and vehicle Excise Duty hikes which hit the homes and car markets.

Now the promotion of growth is the aim it allows the government to make selective increases in public spending in areas like health and schools where increased capacity and higher quality requires more and better paid staff. It will also require more tax cuts on earning and on transactions in our economy.

The official machine has clearly hit back a  bit against the welcome revolution. It has  placed a weaker version of the debt control back into the fiscal framework saying that over a five year period state debt as a proportion of GDP should decline. This is an improvement on needing  an update of the position of state debt every time there is a  new forecast with adjustments made in the short term. At each forecast there is an OBR admonition and a new pledge from government to get the debt down.  

I support the control that says all current public spending must be paid for out of tax revenues. Allowing borrowing for capital investment is fine. It does require good capital investment assessments and good controls over build costs and project management. Some of these need improving as the government plans more public investment.

Meanwhile we await some signs from the UK economic establishment that they recognise the rest of the world is engaged in a battle to prevent the slowdown turning into something worse. Today’s problem is not the threat of too much inflation, but too little activity. The rest of the world is cutting taxes, boosting liquidity and cutting interest rates. The world should escape recession as a result.

In the Eurozone Mrs Lagarde has stated that she thinks the negative interest rates, money creation and bond buying they are still doing is as far as the ECB can go. She wants some fiscal relaxation to boost growth.

Today our hearts go out to the family and friends of those killed in the knife attacks. I send my condolences. I also wish a speedy recovery to those injured.

There has not been a lot of media comment,  but the pound has risen   from 1.06 Euros to 1.17 Euros since August  and from $1.21 to $1.29. The commentators say this has happened thanks to opinion polls implying a Conservative government that can get Brexit done.

Indeed, its not so far off the Euro 1.23 and $1.37 levels  it was at just before the referendum. Since then we have seen a worldwide strengthening of the dollar against most currencies, to do with US interest rates being a lot higher than Euro area, Japanese and UK ones.

Prior to the referendum and any suggestion we might leave the EU sterling hit a low of 1.04 Euros in 2009. In the 1980s sterling was well below current levels against the dollar whilst in the EEC.

There has been a lot of nonsense talked about sterling and Brexit. Sterling has fluctuated substantially against both the dollar and the Euro all the time we were firmly in the EU. Interest rate differentials, different outlooks for growth and inflation all have an impact, as does relative money policy.  Once out of the EU sterling will doubtless  continue to go up and down according to relative sentiment about our economic policy and  valuations as it has done during  our long time in the EU.

I do not predict UK election results where I am taking part. The SNP and Lib Dems do, and are predicting a hung Parliament.  I see the polls as others do, and read that there could still be a hung Parliament where post election deals would decide how we are governed.  I hope that is not the outcome, given the disastrous last months of the last Parliament where no-one had a majority.

Meanwhile some parties are telling us how they would behave if the electorate voted for another stalemate.  Nicola Sturgeon has set out her terms to allow a Labour minority government to take office. She wants an early second referendum on Scottish independence, the removal of Trident submarines from Scotland and more money for the NHS.  Jeremy Corbyn probably agrees with the second and third, and Labour would doubtless finesse the issue of another referendum in order to get Labour into government.

Jo Swinson seems to have abandoned her rhetoric of expecting a Lib Dem majority. Whilst playing hard to get she has made it crystal clear she would not want to help a minority Conservative government, so it only leaves one option of Labour into office . It might well not be a coalition, but just allowing them to win confidence votes would be sufficient for Labour to take over.

The push for a second Independence referendum in Scotland would be disruptive. It would establish the idea that governments only accept referendum decisions they like and make people vote and vote again to get a reversal. It would invite further uncertainty over Brexit, with the parties concerned wanting a second referendum on that as well. It would plunge the country into another two years or more of constitutional wrangling and confusion, undermine  business confidence and get in the way of the new Parliament doing thigs to improve public services, grow the economy and pursue an strong and consistent  foreign and trade policy.

Now is the time for a clear decision. We need a majority government  to move on from Brexit and to remind the SNP they had their referendum and promised to accept its result.

The Conservative Manifesto, echoing Vote Leave, promises to take back control of our money and our laws. Some are writing in to claim we will have to live with tax harmonisation or a level playing field with the EU after we have left thanks to the wIthdrawal Agreement.

I do not see it like that. It is most important we are free to set our own taxes. Today in the EU we have got away with setting a lower Corporation Tax rate than many other states, though there have been adverse judgements on other Corporation tax matters making us do as the ECJ decides. We are free to set our own Income tax rates, but are subject to strict controls on VAT which is partly an EU tax.

The government has made clear it will change the list of items subject to VAT once out. We need to assert our own authority over all taxes. The Bill to implement the Withdrawal Agreement contains a sovereignty clause. Once the Implementation period is over EU tax and other laws will no longer apply unless we choose to enact similar measures.

I do not think we will still have to raise or keep up taxes that we want to lower or abolish once out. Debate on the bill will be an important opportunity to clarify this matter. The likely decision to press on and take VAT off some items will be important proof that we have indeed taken back control of our taxes.