Author: johnredwood

It is that time of year when advisers to the Prime Minister have to consider the first draft of the big speech she has to give to party conference  in Birmingham in the first week of October.

The Chequers proposals have gone down very badly with the party in the country. The negotiations with the EU have not produced a break through for Britain in the way the government wanted.  The Prime Minister should say something along the following lines:

“I have worked hard with my team to try to negotiate a good exit deal for the UK. I have always been friendly and positive towards the EU. I have stressed we would prefer to have a comprehensive future partnership. I have offered to maintain the substantial contribution we provide to  European security through our pledge of armed forces, our intelligence work and our general collaboration. I would be happy to keep tariff free trade between us, even though we import much more than we export. I have offered to pay money we do not owe to show goodwill over the EU’s process of adjustment to the ending of our large financial contributions. I have offered to maintain the rules and standards of the single market for goods even after we have left.

Many of you think I have offered too much. Some of you are concerned that we would not in practice be taking back control of our laws, our money and our borders as promised. I think  we would, but I understand your worries.

I am therefore today withdrawing the very generous Chequers offer, which the EU has told us does not go far enough.The EU has also been critical of important parts of the compromise it embedded. So I say to the EU, in the time remaining time  to do a deal, I propose we  negotiate a comprehensive free trade treaty  instead.

Some say this cannot be done in just a few months. I disagree. If there is a will there is a way. Both the UK and the EU have accepted the Canada Free Trade deal the EU has recently signed. We can take that text as our starting point, and see what more  we can add to it, given that the UK and the EU start on trade and commerce regulation from the same position.

In the meantime I have recently chaired a Cabinet to stress to all Ministers and senior officials in all Brexit facing departments that I want us to be ready to leave without a Withdrawal Agreement in March 2019. I stressed that the government will provide whatever resource is needed to be ready. The problems have been greatly exaggerated. I know of no reason why the planes will not fly or the medicines cease to arrive the day after we have left. Where lower level agreements or understandings are needed between the EU authorities and the UK government we are ready to put them in place. These will be mutually beneficial, and more profitable to the rest of the EY given the large imbalance of trade between us.

The UK economy has done well in creating many new jobs, generating considerable additional tax revenues for public services, continuing to grow and attracting large new investments from leading companies around the world since the referendum. This has happened despite a series of tax attacks on it by successive Chancellors out to damage the housing and car markets amongst others and against the background of a substantial monetary tightening engineered by the Bank of England. It has been possible thanks to past reforms and thanks to the growth of a large cadre of entrepreneurs prepared to venture their  time and their money, and to many people willing to work in new areas and jobs. It has happened with the Treasury and Bank forecasting a recession in 2016-17 that did not happen, and constantly telling us of unlikely  negative effects of our chosen policy of Brexit.

This week again the big difference between the Chancellor and the government was visibly on view. This is  not a new problem.. He was elected along with all Conservative MPs on a Manifesto which said we would get on and implement Brexit. The Manifesto saw the benefits of taking control of our laws, our money and our borders. It looked forward to spending plans that spend the EU contributions on our priorities, and to trade and migration policies that make sense for the UK and are fair to all parts of the world. The Chancellor thought otherwise and has spent his time in office trying to delay or derail Brexit by recreating as much of our current arrangements within the EU as possible.

The government line on timing was that we will leave on 29 March 2019. Under pressure from the Treasury and others the PM then allowed the government to say that if they reached an Agreement late with the EU, any individual clause or requirement of the Agreement that could not  be put in place by 29 March 2019 could slip to a later specified date. She proposed a variable implementation period.  This was still not sufficient for the Chancellor who led the charge to demand a 2 year delay in our exit from  the EU. The EU  pushed this back to 21 months and demanded a high price for this concession. It meant that a Chancellor who is famous for seeking to block any good idea to spend a bit more on a domestic public service that needs it, was happily flagging through a huge new set of payments to the EU in order to stay in it for a bit longer. The absence of  effective  Treasury resistance  to the financial demands of the EU is one of the worst features of their behaviour. One of the main reasons I and others voted to leave the EU is we want to spend the money we send them here at home on a mixture of increased spending and tax cuts to promote faster growth and a stronger economy and society.

Six  members of the government and two Conservative Vice Chairmen resigned over Chequers because they rightly saw it granting too many concessions to the EU undermining what people expect from Brexit. Looking at the arguments within government that have spilled over into the press the differences between the Chancellor’s views and where most of the rest of the party is are larger than the disagreements between those who resigned and the compromise position he helped force on the government at Chequers. As this week has made clear the Chancellor is fundamentally against the whole idea of Brexit, wrongly seeing it as damaging to the economy, a  central policy put to the people in the Conservative Manifesto of 2017 and a core policy of the government. He should back it and be sensibly optimistic about the economy he helps guide, or pursue his disagreements from the backbenches. He should also reverse the damage his and his predecessor’s higher taxes have done in the next budget.

I did not agree with the distorted version of what Michael Gove said about experts. I find people with a genuine knowledge, enthusiasm and expertise about issues and problems are worth listening to and may be able to fix the trouble. A good doctor can diagnose and prescribe remedies. A good plumber can find the fault with your system and mend it. A good cook can produce a great meal. Studying, practising and keeping up to date in the relevant discipline is an important part of being able to do this.

The politician is the elected generalist who has to judge the expertise of the experts as a legislator and in some  cases as a Minister making government decisions.  When you are placed in such a position you soon discover that there are in most areas  a range of experts you can turn to who may have substantial disagreements about what is good advice. Most government and legislative issues are different from needing to know you have broken your arm where you  need a medical support for the bone to heal. They are wider and permit a range of views of how to resolve a problem. There may even be big disagreements about what the problem truly is.  The politician has to cross examine the experts, think through the balance of probabilities, and apply commonsense  and a judgement about what the public will accept when making the decision.

What Michael was getting at was an even bigger problem in today’s world, where a large number of experts in a given field close ranks and all agree about an explanation or a preferred policy where the public is sceptical and where there is a reasonable chance they are wrong. This tyranny of the experts has bedevilled UK economic policy making all my adult life. As an example,  for years the Bank of England, many in the Treasury and international organisations told the UK we must join the Exchange Rate Mechanism. I and a few others pointed out it was likely to cause boom and bust and to be deeply damaging. Our credentials and credibility were constantly questioned. The establishment had its way. It duly generated a very predictable boom and bust, with huge damage to the  CBI businesses who had supported it and to many workers who lost their jobs. The same tyranny of the experts disagreed with rather more of us who said the credit boom of 2004-7 was unsupportable, only for us once again  to be proved correct. The experts also ganged up to try to get us to join the Euro, which would have done grave damage to both the UK economy and the Euro had we done so. Fortunately the public was more sensible than the experts and made it impossible for government to join.

Ministers and MPs do have to stand up against the united voices of experts who have all collectively backed the wrong explanation or policy. That requires insight and courage by the elected officials, who will always be told they have no right to gainsay the experts, by of course those same experts. The media often  makes this more difficult for the politicians. I had to spend much of my interview time during the referendum defending myself from the media complaint that I must  be wrong and the so called experts right when the Tresury forecast a recession with 800,000 job losses for the winter immediately after a Leave vote. This as I expected was a completely false forecast, but at the time the media went on asking who I was that I dared to contradict the Treasury and the IMF. I used to point out I had been on the right side of the forecasts over the ERM and the banking crash with the Treasury and the Bank on the wrong side, but the media  didn’t care. They suffer from expertitis. If all the main experts agree the media just argues their case. The media never gives experts the difficult and challenging interviews that they rightly give to politicians.

We now have the same again over leaving the EU. So many experts gang up to tell us the world has to stay exactly as the EU has designed it. They are once again making a huge misjudgement. Fortunately the public are more sensible than the experts in this matter, so they tell us just to get on with it.

The Chancellor’s re use of silly forecasts by the government  this time admits that the model they use “is not well suited to analysis of short term developments”. That as near as we get to an apology for the disgracefully wrong forecasts of the aftermath of the referendum they used to try to frighten people into voting to remain.

He just says in 15 years time there will be a bit less growth and tries to convert this into tax loss. Meanwhile he studiously refuses to argue the case in government which he should be arguing, that there is no way we should give £39bn to the EU when leaving! Now that would provide a great boost to our economy in the short term, as we could start spending it in April next year.

I am against us signing up to the draft Withdrawal Agreement. It is all take and no give from the EU. We do not owe them money after we have left. Why offer them £39bn for  nothing?

Some in the government say they will only recommend signing the Withdrawal Agreement if there is at the same time a Future Partnership Agreement. Others in government accept under questioning that there will  be no such Agreement drafted and ready to sign at the same time. The  best they expect is some kind of Heads of Terms, or more likely an agreement to talk about such an Agreement. So why would anyone conducting sensible negotiations sign the Withdrawal Agreement without seeing a completed Future Partnership Agreement, or at the very least enforceable Heads of Terms which secure sufficient to justify the Withdrawal Agreement?

I do not see what in the proposed Partnership Agreement justifies the idea that we should pay them £39bn anyway. The essence of the Partnership Agreement is likely to be a Free Trade Agreement. That is in their interests more than ours given the imbalance of trade under the current tariff free model. No country pays another for a Free Trade Agreement. Canada did  not pay the EU to sign its pretty full FTA with them.

The proposed Partnership from the UK side also ranges widely over Intelligence and Security, where we contribute more than the EU does, and over criminal justice co-operation where countries do not pay each other  to enter into extradition agreements.

The debate about so called Deal or No Deal is a mis description on both sides. Deal as envisaged by the EU is not a deal. It is an insistence that the UK signs up to a penal  Withdrawal Agreement, to be followed by 21 months more business uncertainty as the two sides haggle more about future trading arrangements. No deal is not no deal. It will be a series of decisions to carry on trading and working across the Channel using the World Trade Organisation, the Chicago Convention on aviation and other international agreements and bodies to ensure smooth passage under an internationally approved system of governance.

This week the latest figures for UK borrowing showed that in July the UK government collected £2bn more in tax than it spent. As predicted here, the four month figures for the year to date also showed continued outperformance of the borrowing target, with borrowing so far in 2018-19 £8.5bn below budget. The favourable outcome was entirely down to a further surge in tax revenues as the government continues with its budget strategy based on big boosts to tax revenue. Tax receipts were up by 6.6% in July.

The position could be even better if the government would reduce some of the tax rates it imposes. It could collect more higher rate income tax, more Stamp Duty and more CGT if it lowered the rates.

What I would like it to do is to increase public spending in the priority areas I set out recently, increase tax revenues by cutting over high tax rates,, and reducing spending in other areas. The government’s financial position could be transformed if it leaves the EU without a Withdrawal Agreement payment. It could  be further transformed if it cancelled HS2. Just leaving the EU without a Withdrawal fee  would save £39 bn, allowing tax cuts for all of the kind where there is a cost to revenue, spending increases on schools, NHS, defence,a universal  digital signalling expansion of railway capacity, more and better road capacity , and elimination of the deficit.

My critics here complained I just wanted to spend more and didn’t care about the deficit. It would be easy from here to cut taxes for all – as well as cutting tax rates that do raise more revenue – increase spending and have a lower deficit.That is what I am recommending.

“Today”  is losing listeners  (minus more than 800,000 last year) in part because its endless Brexit coverage is one sided and tedious. It strives to make most things as being about Brexit, when most things are nothing to do with Brexit. Yesterday morning a Minister was trying to talk about exports. She was  regularly interrupted by an interviewer who just wanted to shout Remain propaganda at her, claiming that a No Deal Brexit would be a disaster without providing a shred of evidence. This is all too common. Where were the good questions about the UK’s capacity to export, about the changing nature of our markets and the growth areas of our products and services? There was no single question to challenge the Minister or to draw out some new material on the UK as a trading nation. How will the UK fare as the digital revolution advances? Will the big build up of technology businesses in the UK stand us in good stead? Have all the EU trade agreements been novated to us as well as to the residual EU? Is it true that 90% of the growth of our trade will be with countries outside the EU? How is the Trade department’s budget best spent on trade promotion?  We almost learned that the existing EU trade agreements will novate to us and to them, but the interviewer fell short of pressing and confirming this.

Most economic news items like currencies, jobs or balance of payments  have the same explanations as before the vote. Interest rates go up and down thanks to actions of the Bank of England. Shares and currencies go up and down related to world economic changes and government economic policies. Most of us have no wish to hear recycled the same old Project Fear stories  about how trade will be affected after we leave, as explained by the so called experts who wrongly told us to expect a recession in the winter of 2016-17 after the vote along with big job losses, rising unemployment, plunging house prices and a collapsing stock market.

For years we have had to put up with a Today programme which has eschewed serious criticism or commentary on the EU project of economic, social, currency  and political union, and to put up with a refusal to properly  balance the endless pro EU speakers  with enough interviews of  serious minded and well informed participants who have forecast the outcomes of the Euro , the ERM and the moves to political union accurately. Any party or movement anywhere in Europe that wins elections by  challenging  some part of the EU scheme is seen as “extreme right” or “populist” and unhelpful.  Now they are taking the Today programme further away from being a sensible and well informed 3 hour consideration of the news by introducing quizzes, poor coverage of cultural matters , long  commemorations of popular artists when they sadly die and genuflections  to magazine lifestyle issues.

People used to tune in to Today to get a serious if not always balanced  debate and commentary on the business of the nation and the business of business. That’s now hard to come by on a programme which often caricatures itself.

The 2016 budget is famous for the damage it did to the residential property market and buy to let homes for renting. Its high Stamp Duties and withdrawal of interest relief had the predictable effect of cutting transactions and investment, and reducing tax income as well. The 2017 budget did something similar to the car market.

The 2016 budget also cut taxes on North Sea oil production and profits. That has had the predictable and opposite effect to the tax rises. Output is now well up, as is profitability. And yes, the government will collect more tax from the North Sea operations this year than when the tax rates were higher. This has happened despite lowering PRT to zero, as a result of higher Corporation Tax receipts on higher profits given lower costs, no PRT and a higher oil price.

One expert firm is spreading the idea that the Chancellor might reimpose higher taxes on the North Sea now it is doing better again. That would be a great idea if his aim is to cut the output of the area and to reduce his own tax take, but a silly idea is he wants to promote UK prosperity.

How many more examples do we need to supply to get across to the government that lower taxes not only boost incomes and output, but can also lead to higher revenues?

One of the many absurd Project Fear scares is that we will be unable to export many goods to the EU without an Agreement because they will say they do not comply with EU rules any more once we have left. This flies in the face of the fact that they will still so comply, as the companies exporting will continue to meet EU specs for EU trade.

More importantly, the EU has built World Trade rules into its own legal structures. The WTO, for example, has  a  Technical Barriers to Trade Agreement to deal with just such issues, and a Sanitary and Phytosanitary Agreement for agriculture. These require a WTO state to accept product from another WTO state as complying with standards unless there is an objective reason to establish they do not comply. The EU has and uses powers to recognise the standards and competent authorities of third countries to be able to import their goods and to comply with its WTO obligations.

So hear this all you Project Fearmongers. The EU is a legal construct which also has to live by the rule of international law. Under WTO rules non tariff barriers have been dealt with, so the EU cannot legally mount a Napoleonic blockade against UK goods once we have left. After all, the day following our departure UK produce and products still meet all existing EU standards. I still find it odd that those who most love the EU think the EU would want to try to do this. It would also, of course, be a violation of the EU Treaties themselves which require the EU to develop positive relationships with neighbouring states and to promote trade with them.

The WTO has done good work in recent years to make it illegal for countries to impose new non tariff barriers to impede trade. The EU has built these requirements into its own law codes. People on both sides of the Channel will continue to honour contracts and buy and sell to each other after our exit. To suggest otherwise is silly scaremongering.

I thought Jeremy Hunt was a good Health Secretary. He was very positive about the NHS, but insistent on improved transparency and higher standards. He did much to encourage good outcomes by his approach to reporting “never” events and revealing what had been going wrong in some hospitals in earlier years. He did not make mistakes with what he said.

It was therefore a double disappointment to hear some of Mr Hunt’s recent comments as Foreign Secretary. They seemed designed to undermine the UK’s negotiations, which require us to prepare thoroughly to leave without a deal if necessary and to show the UK will do just fine with No Deal. Instead Mr Hunt said that leaving without a Withdrawal Agreement and Future Partnership Agreement “would be a mistake.. and would inevitably change British attitudes towards Europe”. Some of his language was open to interpretation that he thought there were worrying downsides to just leaving.

Let me have another go at explaining the background to Mr Hunt. The UK has had a very troubled relationship with the EU throughout its membership. Pro EU Prime Ministers have ended up in strong dispute with the body. Margaret Thatcher rightly thought we got a rotten deal on financial contributions, and successfully cut them after a bruising set of encounters. She subsequently realised our membership was a bad idea for the UK and came round the view we should leave. John Major had a particularly punishing  exchange with them over the way they damaged our beef industry, which he lost. He also had a running argument with them over the Euro and possible UK membership and only made Maastricht possible by getting us an opt out from its main point, the single currency. Tony Blair sought to reform the Common Agricultural Policy. He made major concessions on our financial contributions, only to be double crossed by the EU who failed to deliver the promised agricultural reform. Gordon Brown reluctantly signed the Lisbon Treaty but denied the press access to the signing ceremony  as we were told in Parliament nothing significant had  happened! It is difficult from this history to share Mr Hunt’s strange belief that we have great relations with the EU that will be irretrievably damaged by a no Deal Brexit.

The UK has a long history of refusing to join major parts of the EU scheme. Originally opted out of the social chapter by a Conservative government, Labour joined that but rightly kept us opted out of the Euro and Schengen, the common borders policy. This reluctant European approach has always caused friction with the EU and has led to policy and legal devices to drag us more under its control despite our refusal to join up to the more obviously centralising policies.

Mr Hunt also seems unaware of the large economic upside we will enjoy if we just leave in March 2019 without the impediment of a Withdrawal Agreement delaying us. The UK economy can receive a major boost from spending the £39bn we would otherwise send to the EU on our public spending priorities and tax cuts here in the UK. We will also be able to draw up a tariff schedule more suited to UK needs and strengths, and sign trade agreements with many countries around the world. If we insist on just leaving, the EU is very likely to seek tariff free trade with us. It is only because they think the UK will give more ground in this negotiation that they are hanging tough on the trade issue.

Many pro Brexit MPs agree that leaving and trading under WTO arrangements is a good option with plenty of economic upside for the UK. The government still believes there is a better deal available than this. If they want to get such a deal they need to show the EU we are serious about leaving without one, and explain the many benefits of so doing in public. Pro Brexit MPs are not going to vote through the legislaiton necessary to slow down our exit and pay the EU more money for no good reason.

Future relations with the EU will  not be mainly determined by how we leave. They will in the future, as in the past, be determined by the interests of the EU and whether they coincide with the interests of the UK. The interests of the two have rarely coincided all the time we have been in the EU, as the UK has persistently refused to accept the clear direction of travel towards full economic, monetary and political union. Removing this major cause of friction should improve relations once we are out. The longer we stay half in and negotiating, the worse relations will get.