Author: johnredwood

The decision to leave was effectively taken when Parliament approved the sending of the Article 50 letter.  The Commons approved the legislation by 461 to 89, with most Labour MPs joining the Conservatives and DUP to vote it through in accordance with their Manifesto.

When it came to vote on the important Clause 1 of the EU Withdrawal Bill, the clause which repeals the 1972 European Communities Act to confirm our exit in UK law, the Commons passed this clause by 318-68, with most Labour MPs abstaining.

Last night the Commons approved the EU Withdrawal Bill on Third reading by 324 votes to 295. Most Labour MPs joined the SNP and Lib Dems in opposing, which was interesting  given their Manifesto position of backing Brexit. 4 Labour MPs  voted for the Bill, and 8 abstained from the vote. Some or all of these were abstentions on principle as I saw the MPs there.  There were three Conservative abstentions I think  for reasons other than opposition to the Bill and no Conservative votes against the Bill.

The SNP and the Lib Dems have consistently opposed the main  measures to put through Brexit.

Mr Macron today comes with a rare gift. He is willing to loan the Bayeux tapestry to the UK. This fine and ancient work of art chronicles the misery and violence of war, showing the deaths of men and horses in battle and the torching of someone’s house. It celebrates the victory of Duke William of Normandy over King Harold of England.

I am sure the offer is well meant, and many would like to see this most famous of tapestries which many of us  have seen in illustrations many times. I will pass over the unfortunate truth  that it depicts an invading French army killing England’s King with the deaths of  many in the English army, before taking over the government of our kingdom. It was the last time England was defeated in war  by  a hostile continental invasion, though many more attempts were made at enforced political union with the continent.

Mr Macron comes to talk about the immediate issue of economic migrants, and the longer term issue of Brexit. We read in advance that he wants the UK to take more economic migrants, and that he wants to reduce the migratory pressures in and through France. It is difficult to see how these two aims are compatible, as any indication that we would welcome more economic migrants will presumably just increase the pressures on France as more seek to come. The UK has always said it will welcome child migrants who are seeking to join parents or other close family already legally settled in the UK who wish to look after them. We also read that he wants more UK cash to help with the border arrangements. It makes every sense, as both sides agreed in a Treaty, that the UK border with France is in the French Channel ports, and their border with us resides in the UK Channel ports. Why allow people to make a journey that entails them arriving as illegals in each other’s country? Of course the UK must pay its fair share of policing the shared borders.

I trust when he turns to Brexit Mrs May will reaffirm that any deal must be better than No Deal. That means it must secure us control again over our money, our borders and  our laws. The principle issue for the EU to resolve is how many new barriers would they like to erect against our mutual trade, as the UK is happy to carry on with no new barriers. The UK should not pay for the privilege of importing more than we export to the rest of the EU, but should not wish to make it more difficult for them to sell things to us unless  they wish to impede  our exports. The UK needs to set out a strong and clear position and then let the EU consider how to respond.

Yesterday’s announcement that inflation on the government’s preferred measure, CPIH,  has fallen to 2.7% was welcome confirmation that inflation is falling again.  The annual rate fell despite the boost to inflation from higher home energy costs, higher prices for petrol and diesel, Council tax rises and higher taxes on alcoholic drinks from the Autumn budget. Dearer electricity featured as an upwards pressure, which is the result of the big switch away from cheaper carbon based generation.

The feared big surge in inflation from weak sterling has not taken place as some predicted. Just as lower sterling in 2016 did not do much to boost shop prices, so it appears higher sterling against the dollar and yen is not doing much the other way either. Shop prices have remained under competitive pressures, with strong internet rivals keeping  many prices keen. That same internet also helps retailers source better value product from around the world to keep their prices down.  Core inflation is at 2.5%.

There is no need for the Bank to worry about the current inflation rate. It is true there is a bit more energy price inflation to come through with oil now trading at $70 a barrel for Brent crude. There may be further Council tax rises to come as Councils seek more money for a variety of spending programmes. There is no sign of a general wage/price spiral about to break out in the way that was common in the last century.

Once again the extreme forecasts of a big surge in inflation based on a weaker pound have not come true, just as industrial output and the general growth of the economy has surprised the Treasury and other forecasters on the upside. The government itself would like a bit more wage inflation, and has sought to get wages up at the lower levels with its Living Wage policy.

This week the pound has reached $1.38, a level it was at in late  February 2016 before the vote on leaving the EU. Its steady climb has received less attention than its previous fall, and is not usually attributed to Brexit in the way some try to explain any decline post the vote. This is a curious asymmetry in the commentary. I also wonder why they thought the pound often fell against other currencies when we were in the EU with no plans to leave.

Various contributors to this site keep alleging that trade would be very difficult under WTO rules with the rest of the EU. They need to explain how it is we have smooth trade with non EU countries at the moment under those same EU rules. They also ignore the fact that our current border  for trade with the rest of the EU is a currency, Excise, VAT, anti smuggling and pro safety border requiring a range of checks and illustrating how much of this work these days is done by electronic manifest and checks that do not delay the flow of goods.

The one area of trade which will be affected by moving to WTO trade arrangements in the event of no trade deal with the EU is the trade in food. This is the only area where high tariffs can  be levied, and are currently levied by the EU on imports from  outside the zone. Were we to adopt the EU schedule of food tariffs on leaving the EU, they would represent a  barrier to continental exporters of food to us.

Our trade in food is in massive deficit with the EU. They sell us the bulk of the £6bn of meat we import, and much of the £10bn of fruit and  vegetables. Since we joined the EEC/EU our home producers have lost substantial market share to the rest of the EU, and have found it very difficult to export to the continent. Our beef industry was banned from exporting for a long period, and our milk industry did not have enough quota to produce more. Since 1990 our meat output is well down, our milk output has flatlined and our potato output is down.

The Netherlands have been successful at taking market share for salad stuffs and vegetables. The Danes dominate the ham and  bacon market, continental cheese producers do well, and the French and German dairy industries also export large quantities to us.

If the EU decides against a free trade agreement with the UK then UK farms will have a great opportunity to produce far more fruit, vegetables and meat for the Uk market. We could return from  the 74% self sufficiency in temperate food to the 95% level we were at prior to the full impact of the Common Agricultural policy. We will also be able to remove tariffs from tropical food products which the UK cannot grow for itself, giving the consumer a better deal.

I have been sent a few copies of a lobby letter concerning the EU Withdrawal Bill which will have its Report stage in the Commons this week. The letter asks me to vote for an amendment that demands a full official economic assessment before MPs vote on any deal which may be agreed between the UK and the EU.

I see no need for more official  economic forecasts and assessments. There have been many of them, including several official ones prior to the referendum and more official forecasts since the vote. The official UK study – assisted by  the IMF and World Bank – prior to the referendum wrongly forecast falling output, employment and house prices in the year after the vote if we voted Leave. More recent official forecasts of the UK economy estimate continued growth by the UK across the period of our departure, which seems to me to  be more realistic.

The UK growth rate 2019-22 will depend much more on domestic policies pursued, and on the world economic background, than on any particular form of Brexit. If the UK government sets a sensible tax and spending policy, and with the Bank of England allows a reasonable expansion of money and credit, the economy will perform fine. As the world economic background is likely to be expansionary with tax cuts, fiscal stimulus, banking deregulation and more energy coming from the USA, easy money in the Euro area and Japan, and decent growth from the emerging market economies, that too will help.

It is difficult to see how the forecasters of gloom could   believe voting to leave the EU would damage our growth, or why actually leaving will damage our growth. They wrongly thought consumer confidence would collapse, and now have unrealistic views that we will lose trade because the EU will wish to invent ways of stopping their exports to us so they can damage our exports to them. They need to understand that the EU and the UK will remain under WTO rules whatever deal or lack of deal is achieved. These rules and low tariffs or no tariffs outside agriculture have allowed a good expansion of trade in recent years for countries accepting the WTO system.