Author: johnredwood

The new 5 Star/Lega government agrees about more than its critics thought it would. The two parties both think Italy has faced too much austerity from the EU and needs to spend more and tax less. They both think there are too many migrants entering their country, and want to see tougher controls over migration. They both think the Italian state debt is too high and some of it should be cancelled. Both want to put Italy first. Both challenge the German view of the Euro scheme, which refuses to transfer money from the rich parts of the zone including Germany to the poor parts of the zone. As a result we have had a series of  Euro crises in stressed countries.

The worst of these crises so far were in Cyprus and Greece. In each case the commercial banks were unable to honour requests to withdraw Euro deposits, because the Central Bank refused them the cash they needed. In the case of Cyprus the Euro there was slashed in value if you held a deposit over a certain size. The Euro has been more stable and its value stronger more recently thanks to the Target 2 balances. Germany and the other surplus countries now deposit their surpluses at the Central Bank for zero interest with no repayment date. The ECB lends the money on to the stretched banking systems of the deficit countries for zero interest. The ECB also helps countries like Italy by buying up large quantities of their state debts to keep their costs of borrowing down.

Italy has now hinted that the ECB should write off the state debt Italy now owes it. The ECB disagrees. Italy thinks there should be some sharing system around the zone, allowing her to spend more and tax less. Germany disagrees.

It is likely Italy will set a budget which challenges the rules of the zone. The row may then lead on to doubts about the Target 2 system and the sustainability of this borrowing based model. Within the UK currency zone the rich parts send large amounts of money to the poorer parts. They pay more taxes, and the lower income areas get more in  benefits, Council grants and general public spending per head. The Eurozone has no such mechanisms. Italy may be about to wobble the consensus which is based on extend and pretend. The ECB lends on surpluses from rich countries to poor countries, claiming it is temporary and will be repaid. It is best not to probe this too much.

Reading   the spin coming out of Brussels from the talks, it sounds as if the EU favours No Deal. Their rejection of every helpful and sensible proposal to let them export more easily to the UK is bad enough. When coupled to their demands that we pay them money we do not owe them, obey laws we might want to modify, and avoid trade deals with faster growing countries elsewhere it means No Deal will be better than the Deal on offer.

I regularly stress to government to need to be ready to leave on 29 March 2019 given this background. If that turns out to be the answer we can start spending the £12bn a year saving immediately, we can sign early trade deals with a number of countries that have been keen to get on with it, take back control of our fish and  put in a UK migration policy that works for us. Any Deal has to be better than this. The EU seems to think a Deal has to be a punishment. As an independent country they will not be able to punish us, so the sooner we are out the better.

Defra is keen that our new farming policy should  be ultra green. If that means we value and look after our fields and farmland, and protect our forests and wild areas, I am all in favour. The good news is we can do that at the same time as expanding the food we produce and meeting more of our own food needs.

I trust the Defra Secretary will take on board from his current consultations a strong feeling in the rural community that we need a farming policy that puts food production into a more central role than it achieved during the years of the Common Agricultural Policy. There are good environmental reasons to cut down the food miles, as well as good economic reasons why it would be better to cut the balance of payments deficit.

Over the last winter I was pleased to find I could largely rely on home produce. There were good home grown potatoes, carrots, cauliflowers, leeks and onions available most of the time. For much of the winter there were excellent English coxes and  varieties of pears. More recently I have turned to New Zealand for their fruit when English has not been available.

It was difficult to find oranges from anywhere other than Spain thanks to EU tariffs, though some citrus fruits from Israel, North Africa and South Africa did find their way to UK supermarkets. A new agriculture and tariff policy after we leave could be a big boost for our farms and a bonus for our consumers.

I could scarce believe my ears when I heard there is talk of a limit being placed on  how much water each one of us should be invited to use. Water is the staff of life. It is difficult to predict how much water you need for cleaning or cooking. I thought it was agreed that as water is so fundamental special care is taken to ensure we all have access to a good supply in our homes and places of work.

No-one argues  that with strong growth in our population we could run out of bread in a few years time. They do not  point out that baking more bread and putting in more ovens will entail burning more fuel and creating more emissions. They do not advocate   a bread allowance, to ensure we control the total and at the same time allow fair shares for all.

We do not do so for a very good reason. The market can take care of future demand. There is no need to interrupt individual choice. I do not eat a loaf of bread at the expense of my neighbour. There are enough loaves at affordable prices for both of us. Bread supply expands to fill the shopping baskets available.

The same should be true of water. Water is a resource in massive supply. Much of the surface area of our planet is taken up by huge quantities of water. You do not destroy the water by using it, but return it to the water cycle after use for reuse. It is the ultimate renewable. If we allowed full competition to supply domestic water as we now allow for commercial water, supply would expand to meet the demand. Let’s do just that.

Water is a good growth product. Let’s clean, store and use more of it. If we need an additional reservoir, put it in. If mending leaking pipes is cheaper, do that. There is  no need to ration.

I’m all in favour of clean air. The Clean Air Acts which removed the smogs from London and our leading industrial cities were great acts of progress. They did not damage our economy, whilst improving the quality of life and saving our lungs.

Today more can be done. Particulate matter in the air can be unpleasant. It comes from domestic and commercial heating systems, from transport, from power generation and from some industrial processes. Progressively higher standards of pollution control can clean our air more.

There has been a tendency in the UK debate to concentrate on the impact of the car and lorry, and to minimise or ignore the role of other sources. It is true there has been quite strenuous efforts to clean the output from  factory chimneys. There has been a strong move away from open fires and coal and coke burning boilers. Their replacement with oil or gas systems has lowered the output of hazardous waste. There has been less concentration on the particulates coming from diesel buses and trains.

The government will be long on words and targets, but more  careful on proposing changes to the way individuals live. You cannot suddenly demand that everyone replaces their domestic boiler or scraps their coal or wood burning devices. Effecting change in the hearths and boiler cupboards of the nation’s homes requires patient progress and incentives to encourage voluntary change. Requiring people to burn less harmful  fuel in solid fuel devices would be possible. Banning bonfires is part of modern life.

The state should look to its own. There are still cities where bus fumes and particulate matter from the exhaust are an important part of the problem on the streets, especially near bus stops . There are stations where waiting trains keep their diesel engines running, with smoke and particulates circulating in high concentrations by the platforms. There are many public buildings with inefficient and dirty heating systems. Improvement and change in these areas would be the most positive way the government could lead this change.

The ONS had to admit today that it had overstated Public Sector Net Debt excluding  banks by £18.5bn in past figures. £11bn of this was an error, and £7.5bn comes from updated figures. It is all part of a pattern of too much official gloom about our economic and financial position.

Last year to end March 2018 total additional state borrowing came in at £40.5bn, compared to the March budget forecast in 2017 of £58.3 bn. So that  forecast was overstated by almost £18 bn.

Given these much better figures the Treasury needs to ask itself some  questions about its spending and taxing policies, and ask why the official forecasts and figures find it so difficult to track what is going on.