Author: johnredwood

The Spanish government has decided to double up its strong arm approach to the Catalan independence movement. The first time it used force, trying to close down the unofficial referendum, it shocked the democratic world and made its position worse.

Once again the Spanish government has decided to take tough unilateral action. This time they plan to close down the Catalan government. What if the Catalan government refuses to be closed? What if it meets in exile? What if some of its employees decline to do the bidding of the Spanish government? Will there now be a struggle to get control of the governing machine in Catalonia? Will this make martyrs?

The Catalan leadership has been careful to let the Spanish state make the tough moves first.Presumably it thinks that  will lead to more local and international support for its cause. The Catalans have consistently sought dialogue and requested legal ways of assessing and responding to Catalan opinion.

It is true the Catalan leaders are acting outside the constitutional law. It is also the case that a democratic state has to keep most of the people most of the time in support of the constitutional franework. If a state loses the consent of a large number of people  to its rights to pass and enforce laws, it will not be able to govern democratically but will need  to resort to using force if it wishes to impose the law without dislogue or compromise.

The railway network contains some great routes that run straight into the centres of our busiest towns and cities. There is spare land adjacent to the track that would take fibre optic cables as well as other utility systems.

The railway needs better wi fi for passengers. All too often on a train the wi fi cuts out in a cutting or tunnel, if you have been able to log into what are still often unfriendly and complex systems. A comprehensive fibre network with communication points with trains would greatly improve reception and access.

More importantly such fibre would also empower a new generation of digital signals which we need to increase train capacities as I have discussed before. With more real time information about where every train is on the system and the speed at which it is travelling it will be possibly to safely deploy more trains on the same tracks to deal with capacity shortages that are common and chronic at peak times. This is a much cheaper answer to the capacity issues than building new track.

These fibre networks can also have sufficient capability to assist the spread of ultrafast broadband to homes and businesses across the country. There can be cabinets alongside the track at intervals to enable adjacent housing and industrial estates to link their local fibre connections to a larger trunk network alongside the railway.

We need to make more intelligent use of these fabulous routes into our main centres. Carrying modern fibre would help a lot as we build the infrastructure for a truly modern economy.I Am pressing Ministers to get on with this scheme. I am also urging them to find other additional routes for fibre cable beyond these track side ones that do not involved putting the fibre under roads. It is high time we got our infrastructure into more accessible places and stopped digging up roads every time we needed to mend or improve.

The official forecasters got 2016 horribly wrong, slashing estimates for the post vote economy. Instead it did well, with credit available, more jobs being created, good growth in car sales and rapid expansion in services.

This year the growth rate is being  slowed by a deliberate monetary tightening from the Bank and from the after effects of tax rises in both the 2016 and 2017 budgets. I have pointed to this likelihood for sometime based on the tax and monetary policies being followed. Official forecasts were revised up a bit from the very low levels made after the referendum. The OBR forecast of 0.3% growth for the third quarter of this year was just 25% lower than the outturn figure. I now read in the press that the Office of Budget Responsibility is going to cut  its forecasts for productivity growth, which in turn will mean lower growth estimates for  output and tax revenues. This will face the Chancellor with a more difficult set of figures against which to make his budget judgement.

I have no problems with more pessimistic forecasts if that is needed to make them more accurate. My complaints have been about a run of pessimistic forecasts that have been wrong, where I have  put forward a more accurate alternative. The adjustment to the official figures will take place against the backdrop of a year so far where the deficit has come in well below forecast. Without further changes to forecasting assumptions, that would have left the Chancellor some welcome leeway for tax cuts and spending rises in areas that need them.

It may well be the case that the last set of productivity forecasts by the OBR  were too high. It is also the case that the OBR has been underestimating tax revenue growth. Their models seem to assume loss of revenue when you cut a rate, yet in many cases as with Corporation Tax, higher rate income tax,  CGT and Stamp duty lower rates have in practice led to higher revenues. The government  needs to avoid lurching  to too tight a fiscal policy to try to hit targets based on estimates that have in the past proved faulty.  The deficit is a figure based on changes in two much larger figures, income and spending. Small changes in assumptions elsewhere can bring big and unrealistic swings in the deficit forecast.

The budget does need to provide sufficient cash for the NHS, schools and social care. It should be tough on any idea that we will pay large sums to the EU, as we need that money at home and we do not owe them beyond our contributions up to departure.  Saving the EU money is the favourite spending cut of many voters. The government needs to revisit how it can instil discipline in spending on the railways. It should ensure the overseas aid budget pays for all military costs involved in disaster relief and peace keeping. It should examine ways of making more affordable housing for sale available to meet people’s aspirations and reduce the strain on social rented housing which has a substantial public spending cost.

The budget also needs to look at how it can use selective lower tax rates to boost output, productivity and tax revenues.

One of the strengths of the old UK constitution was an independent civil service. They could give honest and fearless advice to Ministers, who would decide following discussion with them. Civil servants would then implement the decision. Only Ministers announced and defended new policy. Ministers took the blame if mistakes we made whilst defending their officials who could not speak out for themselves.

This model was changed in two ways during our time in the EU. Government created more public bodies to carry out policy or to regulate. This gave to their senior officials a voice, and meant they had to accept responsibility themselves without the full protection of the Minister. As the powers of the EU expanded, spreading a vast canopy of EU law above our own law, so officials starting telling Ministers that many of the things they wanted to do were illegal under EU law and therefore could not figure in the Ministerial decision. All too many so called Ministerial decisions were instructions from officials who took their orders from Brussels.

Now we are leaving the EU I am told some important officials are finding it hard to adjust to serve a sovereign UK government. They are still running to Brussels for instruction, and telling Ministers that things are against EU laws which Ministers wish to change or will no longer apply. It is true Ministers want to keep big areas of EU law like employment and environmental laws, but there are other areas where people and politicians  want change.

Many want to press on with negotiating trade deals with non EU countries. Some officials claim this is against EU law and cannot be done until we leave. I see no evidence of that in the Treaties. Clearly we cannot sign a trade deal until the date we leave, but what is stopping sorting one out ahead of departure? To do so will not damage the EU. As we are leaving their jurisdiction there is no crime the day we leave.

We want a UK fishing policy. Lets get on and design and legislate one so its ready for April 2019 when we depart. Of course that’s against current EU rules, but as long as it only applies from the day we leave there is again no violation of the Treaty. Civil service jobs have just got a lot more interesting. Instead of having to relay the EU instruction to a frustrated Minister the two can now work together on  a better answer for the UK. Its called democracy and it could catch on.

The Small Federation of Businesses signed a letter with the CBI talking of unspecified dangers they saw for business from Brexit uncertainties. That letter indeed seemed to want to extend the uncertainties rather than reducing them, by recommending a further two years of delay before we fully exit the EU. They recommend a Transitional period of 2 years. That would need to  be negotiated and agreed with the rest of the EU. It delays adjusting to the new relationship.

There is a muddle in the minds of some who seek a 2 year Transitional period. You cannot have a Transition unless you have in place an Agreement about a new relationship which you are then going to move to. It is best currently to concentrate on negotiating that future relationship. If any implementation period is then needed as a result of that agreement, that would be decided once you know the overall Agreement. The Prime Minister has always been clear about this. As the EU is not yet willing to start negotiating a new relationship the idea of transition looks premature. No future Relationship Agreement, No Transition. If as the PM hopes they soon change their mind and do get on with negotiating a future relationship agreement then there could be implementation time depending on what needs doing to execute the Agreement. If there is no special Agreement, then clearly there is no need for an implementation period.

The overwhelming majority of small businesses do not export to the EU. Their confidence levels and ambitions are dependent on the prosperity of the local and UK economies. They are more interested in lobbying the Chancellor before the budget than in seeking to influence any particular way to leave the EU. Issues that worry the small business community most include the indexation of business rates to the RPI, which they would like eased. Business rates are felt to be high, and hit businesses like High Street shops more than some of their on line competitors.  The small business groups are worried about the reduction of credit in the economy resulting from the macro prudential actions of the Bank of England and  the slowing apparent in recent figures for output. They regret some of the tax rises put through in the 2016 and 2017 budgets, and are keen to resist any changes to the way NI is levied on the self employed.

There is a temptation in some journalism and commentary to attribute everything to Brexit when little that is currently happening is to do with Brexit which still has not happened. Small business wants a positive budget that helps promote growth. An end to monetary tightening combined with some suitable tax cuts would be the best response from government to the needs of small business.

The Catalan crisis is deepening. The Catalan nationalists tried to engage the Spanish state in talks after their illegal referendum showed a strong vote for independence with other voters absenting themselves. Instead of offering them a legal way forward, the Spanish state proposes to  double up on its unpleasant  behaviour when they sent in the national police to try to prevent the vote, by  now threatening to close down the Catalan regional government. If they go ahead as suggested there could  be a tussle over who controls the officials and police currently answering to the Catalan government, with loyalties divided and authority in question. The Catalan politicians are invoking memories of Franco’s regime which also tried to curb independent tendencies in Catalonia. They may want to carry on with their government in exile.  With an estimated half a million protesting today on the streets of Barcelona against the proposed Spanish action, it is not going to be an  easy matter enforcing what Madrid thinks should be the rules of Spanish state law.

This is but one of several cases of important regions of larger countries seeking to be independent or to have more autonomy. The typical pattern is for the richer parts of a country to come to resent the control of the wider state, particularly because the  state takes much more money from them than they get back as public spending in their area. In Catalonia they generate 20% of the National Income but receive only 11% of the public spending for Spain as a whole.

Yesterday in Italy legal non binding referenda were held in both Lombardy and Veneto over whether the voters want more autonomy. Here again money was an important topic. Lombardy provides over 50 bn Euros a year  to Rome which it does not get back, and Veneto over 15bn. When this is combined with austerity budgets to hit Euro area targets it creates resentments. It is difficult to know how, close to a  national election, the Italian state will respond to this strong  demand to keep more of their own money and to control their own migration and planning policies that has emerged in the referendum debates.  It is fuelling support for 5 Star and the Northern League, two parties that are polling well and hoping to benefit from this mood in the next national election.

Only in the UK has democracy prevailed, with the grant of a successful referendum to Scotland to settle the issue. There the nationalists argued that Scotland was a net contributor to the Union based on high estimates of future UK revenues from North Sea oil which the nationalists attributed entirely to Scotland. The subsequent sharp fall in the oil price and the continued decline in output from North Sea fields makes it clear Scotland is not a net tax contributor to the UK in the way Catalonia is to Spain or Lombardy to Italy, even if you accept the contested argument that all North Sea revenues should be attributed  to Scotland.

In Ukraine the Russian Crimea has split from the country, followed by a referendum organised under Russian auspices to validate it which was  not held with international approval or agreed standards and inspection  but which delivered a large vote in favour of secession.

The EU used to fan regional feelings through its encouragement of a Europe of the regions. It sought to promote and strengthen regional identities, favouring regional governments to  distribute EU grants. It likes regional languages and other signs of difference. It is strange therefore that now it is faced with the consequences of a greater sense of regional identity and the wish for more regional autonomy the EU recites the mantra that these are matters for the state concerned.  By saying this it sides against the regional political movements. I guess it assumes the states will win and they will retain control over the tax revenues which the EU needs to share to sustain itself.