Author: johnredwood

John Redwood (Wokingham) (Con): Will the Government make a statement on the additional costs of staying in the EU customs union after 2020 and provide an updated estimate of the total costs of the current draft of the withdrawal agreement?

The Economic Secretary to the Treasury (John Glen): Every arm of Government is working at pace to firm up and put in place all necessary arrangements to ensure that we are ready to leave and chart our own course as global Britain. The Government will continue to update Parliament on the progress of the negotiations, and the Prime Minister will update the House shortly in this regard in a post-Council statement.

In respect of the customs union, common rules will remain in place throughout the implementation period to give businesses and citizens critical certainty. This will mean that businesses can trade on the same terms as now until the end of 2020. As the Prime Minister has said, a further idea has emerged—and it is an idea at this stage—to create an option to extend the implementation period for a matter of months, and it would only be a matter of months. But as the Prime Minister has made clear, this is not expected to be used, because we are working to ensure that we have a future relationship in place by the end of December 2020.

As the House will appreciate, the length and cost of any extension to the implementation period are subject to negotiations. Throughout the implementation period, we will continue to build our new relationship, one which will see the UK leave the single market and the customs union to forge our own path and pursue an independent trade policy while protecting jobs and supporting growth.

During the progression of our exit negotiations, we reached a financial settlement with the EU that did two things—honoured our commitments made during our membership and ensured the fairest possible deal for UK taxpayers. In December, we estimated the size of the settlement to be between £35 billion to £39 billion, using reasonable assumptions and publicly available data. In April, the National Audit Office confirmed that this was reasonable.

The Government are committed to upholding our parliamentary democracy through honouring the result of the referendum and remaining fully transparent with Parliament on the deal that is reached, in advance of the meaningful vote.

John Redwood: The Treasury should do some calculations, because it would be an act of great rashness to agree to extend our period when we would be in another seven-year financial period for the EU, with all the consequences that might bring. It could cost £15 billion or more for a year and we would probably have to accept liabilities that might extend for the whole seven-year financing period. Why wouldn’t the EU front-load its expenses when we were still in the thing, and why wouldn’t it expect us to meet the forward commitments, as it says it wants us to do as and when we leave under the existing seven-year period?
We are desperately in need of more money for our schools, our hospitals, universal credit and for our defence—[Interruption.] We desperately need money so that we can honour our tax-cutting pledges which we all made in our 2017 manifesto—[Interruption.]

Mr Speaker: Order. I apologise for interrupting the right hon. Gentleman, whose flow is difficult to stop—and I would not want it to be stopped.

The right hon. Gentleman must be heard. Mr Matheson, you are normally a most cerebral individual. Take a tablet.

John Redwood: Our economy is being deliberately slowed by a fiscal and monetary squeeze that we need to lift. We need tax cuts to raise people’s take-home pay so that they have more spending power. All this is possible if we do not give £39 billion to the EU, and all this will be even more possible if we do not pledge another £15 billion or £20 billion for some time never, if we are now going to give in yet again.

When will the Government stand up to the EU, when will the Government say that they want a free trade agreement and they do not see the need to pay for it, and when will the Government rule out signing a withdrawal agreement that is a surrender document that we cannot afford?

John Glen: I am grateful to my right hon. Friend for a number of Budget representations on that point. What I can confirm is that, when the sum of £35 billion to £39 billion was agreed, it was agreed on three principles: the UK would not make its payments sooner than it would otherwise have done; it would be based on the actual rather than the forecast; and it would mean that we would include all benefits as a member state. I recognise the wide range of concerns in the House, including those raised by my right hon. Friend, but we are at a delicate stage of the negotiations and the Prime Minister will be speaking to the House shortly.

Yesterday Mrs May received plenty of friendly Conservative advice to be firmer in her negotiations with the EU. Conservative leaders who love the EU more than their party have in the past lost their jobs. John Major, David Cameron and to some extent Edward Heath all lost their jobs by being too enthusiastic about the EEC/EU. The overwhelming majority of Conservative members today expect their Leader to stand up to the EU and to get on with leaving the EU as we have agreed to do. Mrs May seems to understand where her party is and acknowledges that we want to take back control of our money, our borders and our laws. She has made a clear red line over a border in the Irish Sea, but needs to dig in behind other red lines as well. She is in danger of being dragged into potential concessions that compromise such a result.

John Major is the best example of a leader whose complete tenure of office as PM was dominated by a bad policy decision which came from the EU. The UK’s membership of the European Exchange Rate Mechanism which he had championed with his friends at the CBI did substantial economic damage. It first led to an inflationary credit expansion, then led to a sharp monetary contraction, a big fall in the pound and penal rates of interest which brought on a predictable and damaging recession. It did not just cost John Major his job, but meant the Conservative party was out of office for 13 years and failed to win a majority in the Commons for 18 years. The CBI leadership sought to ignore the damage their recommended policy did to many businesses.

David Cameron too lost his job directly be being too pro EU. He failed to negotiate firmly with them. He then wrongly decided to recommend a so called deal which amounted to very little, only to discover the UK voters wanted to take a much firmer line with an EU that had treated him badly. He rightly saw that his position was untenable when he lost a referendum on the issue of continued membership on his renegotiated terms, having been fully behind staying in. He too trusted the CBI advice, and saw similar advice coupled to wildly inaccurate short term forecasts from the Bank and Treasury look absurd in the year after the vote.

Edward Heath took the Conservatives down to defeat in a General Election mainly owing to the economic problems of the time, part national and part more global. The fact that the UK had just joined the EEC was however a contributory factor to his demise. There was no improvement in output, incomes and living standards when we joined in the way Mr Heath had promised, and many UK manufacturing businesses were hit badly by the tariff free competition EEC membership unleashed in steel, cars, ships and others. Mr Heath had also upset a significant minority in his party, lost friends over the EEC, and diverted enormous amounts of government time and attention to putting us under EEC rules and taxes to try to conform. He did not see the economic disaster coming and when it hit he had few political friends left.

Last week I attended a reception with Head teachers and Deputies at Westminster.

One of their issues was difficulty in recruiting and retaining the teaching staff they need for their schools. When I asked why they thought it was sometimes difficult, they gave me a complex answer.

They volunteered that it was not just or even mainly a question of money. They suggested that they wanted teaching to be better thought of, for it to be accepted as a profession.

I explained that all the MPs I listened to on the subject did treat teaching as a profession, and most of us say it is an important and worthwhile occupation. So who exactly is not treating teaching seriously? Why do some teachers feel they are not sufficiently appreciated? Part of the answer according to the teachers seemed to be a new (but I assume limited) cadre of aggressive parents who intervene regularly and challenge the judgements of teachers. For some it is a feeling about social attitudes to school and discipline more widely.All those of us who wish schools well and understand the importance of a good education need to rally behind the many good teachers who seek to uphold good values. There are limits to how much teachers can do to remedy problems at home or to tackle things like obesity. Successful education requires consent and support from parents.

It leads us to ask what is a profession? I think the world has moved on from the rather narrow past when some said there were only two professions, law and medicine. If you look at what set them a bit apart, it was a combination of self regulation, examinations to control entry into the profession and to ensure basic competence and knowledge, sometimes allied to special clothes and positions that generally commanded respect and were different from others. The lawyer in court wears a gown to show his or her academic and legal status. The doctor in hospital may wear a white coat to distinguish himself or herself from others.

There has long been an issue of what distinguishes a profession from a trade or mystery. Many trades also impose requirements to gain knowledge, pass exams, maintain standards and belong to a professional or trade body. Gas heating engineers need substantial knowledge, have substantial safety responsibilities, have to maintain their knowledge as systems and products change and belong to an accreditation body. They are no less professional than lawyers.

Teaching and the clergy are closer to the lawyers in the conventional understanding of professional status. Teachers like lawyers have to attain academic qualifications as well as practical teaching qualifications. They may wear gowns in more traditional schools or on special occasions. They have to maintain standards. The Catholic and Anglican clergy make extensive use of special clothes to single themselves out, and also normally have academic qualifications.

I would be interested in your thoughts on what more can be done to make people realise teaching is a worthwhile and rewarding career.

The Conservative Manifesto for the 2017 election made pledges on the matter of the EU, and has never officially been renounced or amended by the Leader. I and many others stood for election on it and supported the Brexit pledges in it. I did not support the elderly care proposals in the same Manifesto as I made clear before the election. The PM subsequently dumped these.

It might be helpful to remind the PM and others of what the Manifesto said:

“We continue to believe no deal is better than a bad deal”. The Manifesto proposed a Future Partnership Agreement but accepted it was only worth signing if it was a good one. This remains the PM’s stated view.
It also said
“As we leave the EU we will no longer be members of the single market or customs union” This too remains her view, though there is now unwelcome discussion of staying in the Customs Union for longer.
The Manifesto also saw the need for linkage between the EU wish for us to sign a Withdrawal Agreement and the PM’s wish to have a Future Partnership Agreement. “We believe it is necessary to agree the terms of our future partnership alongside the withdrawal, reaching agreement on both within the two years allowed by Article 50”. Here the PM has proceeded to negotiate mainly on the Withdrawal Agreement, making it impossible to agree a Future Partnership Agreement before we leave in March 2019. This surely means we cannot sign the Withdrawal Agreement they propose.

Those who most want us to stay in the EU think the EU is a dreadful organisation. They wrongly say the continent will mount an economic blockade of the UK, stopping us importing medicines and food, to starve us back into membership.

There are many reasons why they cannot do this. It would mean breaking international contracts to supply. It would mean overturning World Trade rules. It would mean contradicting the EU Treaties which require the EU to have friendly relations with neighbouring states and to promote free trade with them. It would mean the EU acquiring new powers to prevent private companies and individuals doing business with UK customers and suppliers.

Let’s take the case of food imports. Food coming through a UK port will be checked and charged customs by UK authorities. They can do so away from the border, and can ensure smooth passage through our ports. Why would they want to suddenly hold up goods that we are importing just fine today through those same ports the day after we leave? Why wouldn’t they levy customs as they levy VAT and Excise today, electronically.

Or let’s take the case of medicines. A continental drug supplier will have the same contract to supply the same drugs on March 30 2019 as on March 29th 2019. The NHS has tested and approved the drugs for us. The company has factory based test facilities with inspection systems that satisfy the NHS today. They will still satisfy the NHS on March 30th 2019.

So why would the supplying company wish to withhold supplies and face a legal challenge from the NHS? Why would a continental port wish to hold up the export of goods for further checks, when these goods have all been produced to EU standards and checked in situ?

Some say the port of Calais will delay our exports going to the continent, demanding more checks at the frontier. If they do then the ports of Rotterdam, Antwerp, Zeebrugge, Ostend and Amsterdam would love to take the business and will not wish to hold them up. Many of the lorries going back to Calais are continental lorries running empty and wanting to pick up a new revenue earning load as soon as possible. Why would the continental port wish to get in their way?

The EU has many powers, but it does not have the power to impose an economic blockade on a friendly European state that happens not to be a member of the EU. The private companies involved all want to keep the business.

I see others are now writing that Stamp Duty revenues have been adversely hit by the imposition of much higher rates, as predicted here. Official figures show Q2 2018 housing Stamp duty revenues down on a year ago, with sharp falls in transaction volumes for dearer homes following the higher tax rates. So why doesn’t the Treasury set rates that increase the revenues instead of hitting them?

Many commentators wrongly assume the EU will impose some kind of economic blockade on the UK once we leave the EU. They are not making any legal provision so to do, and it is difficult to see how they would do it. They cannot break the many outstanding contracts to supply or to import. Were Calais to work a go slow the Belgian and Dutch ports would willingly divert the business and gain market share. The planes will fly on March 30th, and Airbus will still be buying UK made wings in order to meet its customer contracts. The EU has many powers over the UK government, but it has limited powers over importers, exporters and multinational companies when it comes to stopping them doing business. National governments employ the border and customs staffs.

What most commentators then ignore is the big gains we will be able to achieve from repatriating our money. The balance of payments will immediately improve by £12 bn a year as we stop sending net contributions to the EU. We will be able to spend more money on our essential public services, and have some tax cuts. If we spent the full £39bn they are proposing to spend on so called transition on the UK economy over a two year period, that would provide an immediate 2% boost to incomes and output over that time period, all other things being equal.

There is also the question of how much stimulus to the economy we could achieve by setting a different tariff schedule from the EU one that met our own needs. Imposing some tariffs on EU exports to us where we have capacity to make at home could provide a boost on a net basis, given that we import more than we export. Cutting tariffs on products from outside the EU that we cannot make or grow for ourselves would boost our real spending power. I am not going to put a number on this, as it would not be nearly as great as the impact of spending our own money, but it could also be a positive figure.

I am still awaiting a formal reply to my letter proposing the government now publish our tariff schedule for next March. They have told me informally they agree, so will they get on and do it.