Author: johnredwood

If the government wants to plunge us into more debt to support investments, it is vital those investments make profits and pay the interest on the debt.

The government needs strong guardrails to achieve this. In each case they need to ensure

1 Any private debt added to a partnership scheme is non recourse to the taxpayer

2. There is a clear stream of future revenue from the completed project that covers the interest on the debt more than twice

3. They should set a minimum target return of say 4% above inflation and explain how this can be reached in the Business case

4 Management should be on a low basic salary with substantial bonuses if profit and cash flow targets are hit

5. The interest on the extra state borrowing should be a charge on the project or company being financed.Dividends would only be paid to the state when appropriate.

6. The state would ensure all necessary permits and licences are available to the project, subject to them meeting the required standards.

Faced with charges of a borrowing splurge on so called capital investment the Treasury says there will be guard rails. They will not borrow all they will be allowed to under their new laxer rules. It would be more convincing if they told us how they choose the investments,how they will control them and what the actual borrowing limit is going to be.

The sad truth is the nationalised industries have  a dreadful record of unproductive and unprofitable investment. A very expensive Post Office computer system sent honest employees to prison and landed taxpayers with a large compensation bill. The Post Office has presented  taxpayers with accumulated losses of £799 million despite or because of the bad investment. HS 2, a nationalised railway, has been unable to deliver an important project to time or anywhere near budget. The project has had to be slimmed down losing its main point of going to the North of England. There will not be enough extra revenue to make a profit or pay the interest. The rest of the nationalised railway spends on capital only to need more subsidy and state support.

All the time roads are nationalised and paid for out of road taxes that greatly exceed road costs there is a case for further expansion and improvement in the network on state borrowing. Unfortunately this government so far has announced cuts in new road spending. Roads are crucial to our economic success as service providers and on line parcel deliveries come by van, ambulances drive to hospitals and trucks supply our factories by road.

There is no need for government investment into most energy projects. Customers are made to pay high prices for U.K. energy. If the government let the private sector make the investments we need in replacing imported LNG and building some additional gas turbine capacity we could boost growth and help lower world CO 2.

The government is right that we need to invest more. There is room for disagreement about what we need to invest in, and how much of it should be paid for by taxpayers.

The government’s current plans include the expensive and wasteful £20 bn for carbon capture and storage. They need to give greater priority to

New gas turbine electricity generators to keep the lights on and power new data centres

A fleet of smaller cheaper nuclear reactors

Several new reservoirs to ensure plentiful future supplies

New drainage pipes with more capacity

More domestic oil and gas to displace imports which produce more CO 2

More broadband and data processing capacity

More bypasses and dual carriageway strategic local roads

More motorway capacity

Digital signalling throughout the railway network to expand train capacity

Many of these projects can and should be privately financed.

The main problem with the Rachel Reeves idea that we can afford to borrow more in the public sector is it assumes the investments made by the state will produce income and profit and will be able to pay the interest and then repay the debt. Recent experience  says this is unlikely. HS2, a new nationalised railway is more than three times over budget, long delayed and little prospect of any revenue let alone profit anytime soon. The nationalised Post Office was given large sums to invest in new computers, only to send its innocent staff to prison and land taxpayers with a large compensation bill. The high spending nationalised railways as a whole lose large sums before subsidy and burden taxpayers with large debts.

Changing the way the debt control is calculated to allow more investment only works if all the investments make money after paying for the debt. If they turn out to be like the railways or the Post Office borrowing more means more debt, more burdens and higher taxes.

 

It is always better for governments and politicians to tackle problems they can do something about. Turning themselves into bad historians to posture about long past evils is pointless.

We can all condemn the eighteenth century slave trades. If we do it helps to remember not just the European slave traders that profited from evil, but also the African leaders who sold people to them. The Barbary pirates raided English towns and attacked English ships to enslave English people. We also need to remember the crucial role played in the nineteenth century by the U.K.  in abolishing much of the trade. The Royal Navy enforced new laws against it.

The problem with the past is it teems with slavery. The Romans relied on slaves  and enforced their imperial government on subject peoples like the English with a brutal army. The Normans killed our King and imposed serfdom on many English people, stealing the lands from their English owners. No one suggests these wrongs can or should be tackled by compensation or apologies.

The past is a foreign land no one can revisit. We can study it, learn from it and seek to understand it. We can also all agree slavery is wrong. That should lead us to tackle it now in our world.

A recent poll puts Labour down to 27% from their poor election showing of 34%. It puts the conservative opposition on 48%, split between the Conservatives on 27% and Reform on 21%.

The large Labour majority on a reduced vote share from Jeremy Corbyn’s was only possible because many conservative voters felt let down by the Conservative Party, staying at home or voting Reform.

Labour has lost support rapidly. It has revealed a wish to tax people and businesses excessively which it concealed pre election. It has found governing extremely difficult and has impaled itself on the freebie row

As we are likely to have four more years of this government this site will concentrate on what the government is doing and how it can serve us better. There will be jostling between Conservatives and Reform over who can best oppose which will delight the government, hoping to be re elected with less than a third of the vote and less than a fifth of all electors. Those who are primarily interested in the Conservative/Reform struggles should go onto their sites to debate. I will not usually be posting Reform criticisms of Conservatives or Conservative criticisms of Reform.

Any airtime Conservatives or Reform get should concentrate on what the government is getting wrong and what it can do to improve. There can only be a different government when enough Reform voters back the Conservatives or enough Conservatives shift to Reform.

This site all the time we had a Conservative Party government concentrated on the government and how it needed to change policy. It rarely commented on how the Opposition did its job.We need an opposition which can combine well researched criticisms of government actions and results with a better vision of how the U.K. could benefit from policies that promote freedom and prosperity.

This site is mainly about the conduct of government and the evolution of policy.

 

The health Secretary has said a few bold and sensible things. He has said you do not just tip more money into the. NHS without reform. He has said maybe they need to buy in more private sector help to deliver more and better free care to patients.

More contentiously he has said the NHS is broken. Instead of getting on with mending it he now proposes a long and large consultation with staff and patients to see what to do. It’s like asking the audience on a quiz show if the contestant hasn’t a clue about the answer.

Patients will tell him they want less waiting time, easier access to GP appointments and better treatment when they need it. Staff will tell him they want more pay, better hours and better working conditions. No great need to go to consultation on that. Consultation with staff should start when he as their top boss decides what changes he wishes to make to working practices. Consultation with patients should start if he wants to change the way they access treatment.

His instinct that there needs to be change is a good one. History is littered with well intentioned Health Ministers who found guiding change was expensive and difficult. Wasting much of the first year on asking the obvious is not a good start. The NHS needs help now in spending its huge sums in the best way, and in hiring and motivating the right staff to get more work done. Firing the Chief Executive of NHS England would be a good beginning to underline the message that currently senior management are not boosting morale or productivity in the way we need.

Last weekend Moldova voted on  a plan to write applying to join the EU into its constitution. The result we are now told is very close to 50/50, not the big endorsement of membership the government expected.

The papers and media have  been running weeks of stories of higher taxes, on savings, on pensions, on private equity, on leaving money on death, on buying and owning property, on making profits on a business or from owning shares, At any point the Chancellor could have ruled out some or all of this speculation. Instead she seemed to delight in the array of ideas being generated to tax anyone more who dared to work hard, save more, succeed in business or own assets,

She has given interviews in the past querying tax breaks for ISA s, complaining of private equity carried interest, displaying a hostility to wealth creation and ownership. The only constraint on her wish to tax higher incomes, better pensions, more wealth may be the thought that putting the tax rates up too high could lead to a loss of revenue  and a further exodus from the country. This weak view of the Treasury does not extend to the valid view that lower tax rates on income, wealth and transactions can usually boost revenues.

It’s the politics of jealousy, the economics of misery. Offering people tax incentives through ISAs to save is a good idea. No need to discourage it. Making it attractive for private equity to invest here is good for jobs. Don’t send them abroad. Letting people build a decent pension pot allows them to look forward to retirement and avoid claims on the state. Why be jealous? Allowing relief from Inheritance tax for some U.K. assets encourages investment. Why risk it?

Tax rates are already too high in the U.K. Non Dom changes have driven rich people out. Tax changes to property is reducing the number of rented properties. Limits of tax relief for pensions led some like doctors to retire early. Tax rises will slow growth. Particularly clumsy ones will reduce tax receipts. As a supporter of the government’s faster growth aim I urge the Chancellor to think again before hitting the strivers, savers and investors.

The last government held a multi year spending review setting out spending plans for the 3 years 2022-3 to 2024-5. They would have held another this autumn to set 2025-6 to 2027-8. The absence of plans from next year means the new government can set out new plans without needing to amend old ones.

The government has decided it cannot deliver a 3 year spending plan this year, delaying it until spring 2025. Budget 2024 therefore needs to set out a one year spending plan for 2025-6 pending the longer term plan. The budget as always will also review progress with this year’s spending against plan, a plan set by the outgoing government.

The government has chosen to have a row about the adequacy of provision for this year. Their alleged £22 bn overrun of spending includes £11 bn of extra pay largely brought on by their choice to put pay up by much more than inflation which the original estimates allowed for. The second big item is more than £6 bn extra for migrants, in part the result of illegal crossings going up this summer as the new government scrapped Rwanda and struggled to control numbers. The original overall budget did include a contingency fund as there are often overspends in year.

Press reports say Cabinet Ministers are angry  that Treasury Ministers are asking them to consider reductions in spending to offset increases they wish to make. This is a normal process undertaken by past  Labour as well as Conservative governments. It is important Treasury challenges spending streams. Total public spending has surged from £852 bn in 2018-19 to £1226 bn this year, a rise well ahead of inflation. Any budget for next year needs to start by reviewing  what all that money is spent on, why public service productivity has fallen and whether some of it like Bank and railway losses is avoidable.

Too many Labour Ministers think increasing public spending is a good. Delivering  more and better public service in NHS and schools is a good. Doing it more efficiently at lower cost is better. When I go into a shop I do not want to know they have just spent more on running the shop. I want great products at good prices.

The Labour Manifesto ruled out increasing taxes on working people,specifying VAT, Income Tax and National Insurance. There is now a gloss being placed on this. Apparently that meant in the case of National Insurance there would be no increase in employee NI but there could be in Employers NI. Labour say that is a fair interpretation of the promise. Their critics think it would be breaking the promise.

Clearly employer NI is a tax on jobs. To pay it a company would need to put prices up and hope to pass on the increase, or employ fewer people or put up wages less to offset some of cost. All that sounds a bit like an NI tax on working people. What do you think?

There are rumours that the Chancellor may put up motor fuel duty. Working people tend to burn more fuel than the retired or those staying at home. There is the journey to and from work. For many self employed there are the visits to customers. From painters to carpenters, from plumbers to electricians there will be fuel for  the vans they need to take tools and equipment. That’s another tax on working people, though not covered by a specific Manifesto exemption. It is inflationary, is an unwise tax on working but not a broken promise.

There are rumours of adverse tax changes for saving to a pension fund, or taking money out of one on retirement. These must be Income tax rises affecting working people. It is a worker doing the saving and a worker sorting out transition to retirement. That must be ruled out on any reasonable interpretation of the Manifesto.

There are rumours of changes to CGT. Many people incurring CGT bills on homes, businesses or shares they are selling will be working people. They are clearly not covered by the Manifesto exemption. If however a working person was made to pay Income tax rates on gains that arguably is an Income tax rise for a working person.