Author: johnredwood

The Prime Minister rightly said we need to take back control of our money.

One of the important things the government can do in this election is to say Goodbye to the austerity economics of the EU budget rules and Mr Osborne’s tenure. One of the plessures of Brexit, a positive for voters of all persuasions, will be the ability to spend the net contributions we currently send to Brussels. Once we are out we can offer tax cuts and more spending with no rise in borrowing. Spending the money at home will help our economy and put  more of our people to work here, instead of having to send the money abroad  and run a larger balance of payments deficit.

We could remove VAT on domestic fuel, tampons and green products. We could spend more on the NHS, training more UK people as nurses and doctors. We coukd spend more in our schools and do more to promote better roads and public transport.

The pound has risen against both the dollar and the Euro on news that Mrs May is seeking a new mandate to implement Brexit. The cost of government borrowing has also fallen, with bond prices rising.

She tells us “Britain is leaving the EU and there can be no turning back…..The country is coming together but Westminster is not”. She wants a mandate given the way the Opposition parties are behaving over the Brexit negotiations.

 

I look forward to the election, and assume Labour will also be running on a platform of wanting to make a success of Brexit.

The EU is not happy with the results of the Turkish referendum. Some EU politicians argue the campaign was not properly conducted, with irregularities in voting, undue pressures on some voters and one sided media coverage heavily influenced by the government line. Many in the EU believe the changes will be bad for Turkish democracy, giving the President substantial new powers to govern without proper checks from Parliament and the courts.

This response is likely to harden those attitudes in Turkey which think the EU has been playing them along for too many years without allowing them to join the EU as full members. The first EEC/Turkey Association Agreement was signed in 1963. In 1970 the Customs Union was developed with Turkey, and more progress was made with a fuller document in 1992.  The original aim was for Turkey to be a full member of the Customs Union, to be part of many common policies, and to reach freedom of movement with the EU.  In 2013 a worried EU signed a Readmission Agreement with Turkey to get Turkey to take back more people, and on March 18 2016 a wider ranging policy was signed to enlist Turkey’s help in controlling migration across the Med.

The supporters of President Erdogan claim the referendum was fairly fought and conducted with plenty of outside vigilance and interest. They remind the many critics that the 18 changes to the Turkish constitution passed through Parliament with substantial majorities, typically around 340 votes in favour and 140 votes against on an Article by Article basis in a 550 seat Parliament. The changes include an extra 50 MPs, 5 yearly Parliamentary and Presidential elections, and a requirement for impartiality by judges. Parliament can pass a law to  overrule a Presidential decree and can institute a Parliamentary review of the government. Judicial review is also introduced for government actions. The military courts are abolished.

His critics think he will have too much power through appointing and influencing judges, using the powers to rule by decree, and acting as the Leader of his political party. They seem to think he will be able to win a couple of elections easily to stay in government for the next decade. They do not rate the Parliament as an effective check on the new government.

The EU is making a mess of handling its relations with its neighbours to the East. Ukraine is badly split and damaged by civil war. Now Turkey is moving away from the EU’s model of Association. What should the EU now do to make the situation better? What type of relationship is now realistic and desirable?

Parliament can make mountains out of any molehill in the UK, once we have left the EU. It is curious that those most hostile to our departure from the EU now claim to  be the most protective of the very Parliamentary sovereignty they so wantonly gave away. They need not worry.  Out of the EU,  Parliament can debate and vote on anything it wishes. It can hold government to account and change the law any day it likes.

The synthetic anger over the so called Henry VIII clauses in the Great Repeal Bill are just such a phoney war and a false tenderness towards the UK Parliament. The government has made clear that all substantive changes to EU laws, ranging from a new immigration policy to a  new fishing policy, will of course need primary legislation. Parliament can shape and influence that to its heart content, in a way it could never do when the rules were laid down by the EU.

The so called Henry VIII powers, often used to drive through EU matters, will only be used for government to make technical changes to existing EU law to make sure it does still work as UK law! That surely is something the Remain people should like, as presumably they welcome the continuity of much EU law as UK law.

It is a curious feature of the modern debate that the Remain supporters in Parliament want us to talk about nothing but Brexit the whole time, and then complain that we do not debate and vote on it enough. As one who welcomes Parliamentary scrutiny and debate on the use of power  I have no problem with Parliament doing this. Parliament does, however, need to have some sense of balance and proportion. We need to complement the many hours of debate and scrutiny of the UK’s position on Brexit with proper use of our powers in many other areas, and more debate of the needs and tactics of the rest of the EU.

It is fine for the Opposition to criticise or demand more of the government. It should also be the loyal Opposition, recognising the impact its words may have on the UK’s position in the EU talks.

Some good points have been made about diesels and air quality, and I am receiving constituents emails arguing against new penalties on owners of modern diesel cars.

One of the best points made is we need to take into account the amount of use made of various categories of dirtier vehicle. A typical privately owned passenger car spends most of its time parked. A motorist who averages 8000 miles a year, and averages 25 mph through a mixture of open road and congested town driving uses the vehicle for just 13 24 hour days or 26 12 hour days equivalent. A public service vehicle like a bus may well operate for more than ten times that amount of time, over 260 12 hour days a year. That means we will get a far bigger saving of dirty exhaust if we replace the old bus than the old car. The same is also true for many diesel trains that operate long hours, and for diesel delivery vans and lorries.

It is also important to recognise that congestion and delay cause far more pollution than allowing vehicles to make optimal progress at decent cruising speeds when the engine is not labouring, is in an economical gear, and not having to stop and start. This argues for the adoption of more policies that can reduce congestion, as have often been discussed here. Improving  junctions is central to this. Parking more of the cars that are  not in use off the highway is also an important aim, as often parked vehicles cause congestion and delay through straddling the highway.

Someone pointed out that vehicles often do not achieve the test specifications on emissions. This is because actual drive cycles are often different from test cycles. The more the vehicles have to slow down and speed up, and sit in traffic, the worse the emissions performance is likely to be. Older vehicles do not have cut outs at traffic light and other stops. Trains often keep their diesel engines running whilst waiting for considerable periods of time at terminus stations and to adjust service times. These are matters which newer vehicles and engines can help address.

 

A  clumsy new tax is not the answer. Cutting emissions requires much detailed work on driving needs and conditions, road space and junctions, and ages of different types of vehicle. It is certainly important for the state to start by tackling public service vehicles, as they do so many more miles than the private car.

I was one of the MPs who needed persuading that the Houses of Parliament needs a thorough overhaul and refit such that we need to move out for several years and spend many billions of pounds on the buildings.

I understand that wiring, plumbing and other services need replacing or updating from time to time. These do not all have to be done throughout the Palace at the same time. It is true there is asbestos in the buildings,  but most of it is stable and no hazard unless disturbed by builders. Many of the works drawn up for the large project might be nice to have modernisations or improvements, but are not essential to the functioning of the place. Of course there needs to be a regular programme of restoration of stone work and windows to keep the building water tight, and it is crucial to keep roofs in good repair to keep rain out. More of the work can be done in the summer recess, and more can be done by builders taking over smaller sections of the Palace for a time period to do more fundamental work.

I read that following the recent  terrorist incident there is some rethinking going on. One of the advantages of the present building is the presence now of a security strengthened perimeter. On the fateful day it is tragic that a policeman on duty was killed. I trust lessons will be learned about having the right support at entrances to deal with any violent intruder and to protect the police themselves before he does harm. It is also the case that the mass murders and injuries occurred beyond the perimeter. We should be more worried about pedestrian safety outside the Palace as a result of those events. The Bus and cycle lane open to the adjacent pavement allowed the murderer easier and faster access to the victims.

There is a growing mood in favour of cleaner air. There is general agreement that the air in city centres like London needs urgent action to clean it up. In the centres of our Thames Valley towns there is also room for improvement. Some are already blaming the diesel car as the main cause and urging higher taxes or bans on diesel vehicles.  It is a good idea first to examine what we know about the sources and causes of pollution.

The London Assembly researched the sources of Nox in London in 2015. This showed the following sources

Bus, coach and rail public transport    18%

Goods vehicles    17%

Gas heating systems    16%

Non road mobile machinery    14%

Diesel cars    11%

Petrol cars and motorcycles  8%

Aviation    8%

Industry   7%

The TFL study in 2016 showed a similar pattern, with gas heating and industry  as the biggest source, and with  both bus and coach and goods vehicles each a bit bigger than diesel cars.

The new Euro VI standards for engines require both petrol and diesel engines to emit less than 5mg per km of particulates. They allow just 80 mg of Nox for diesels compared to 60 mg for petrol, whilst allowing petrol engines to emit more carbon monoxide than diesels (100mg versus 50mg)

In order to clean up the air, especially removing particulates, requires replacement of a lot of older technology buses, trains, cars, and  gas boilers. This will also allow the introduction of equipment which is more fuel efficient, also helping to drive down emissions and cut running costs.

Instead of working up a new series of penalties for owners of older diesel cars, government should work on a range of incentives to tackle the problem in a broad based way, removing the oldest buses, lorries, cars and boilers which would do the most to improve the position. it could also give a welcome boost to the home industries that produce these items.

We should not ignore the contribution replacing old heating boilers at home and work can have, with the added  bonus of cutting running costs. Lets have better scrappage and financing schemes, so more people can afford to make their contribution to cleaner air, and can at the same time take pride in owning better machines.

 

 

 

Most people’s definition of the rich is someone better off than themselves. The millionaire feels poor in the company of billionaires.

Clearly, someone who has a decent home they own and sufficient invested capital to  be able to pay their bills for the rest of their lives without needing to take a paid job is well off. Many retired people however, are by definition in that category. Many when they retire own their own home and have sufficient accumulated pension to live comfortably without recourse to work. People who achieve that well before retirement age, usually through success in business  but sometimes through inheritance, have financial freedoms the rest of us do not enjoy.

I do not myself wish to punish people who through hard work and energy have bought themselves a decent home and built up financial savings for their later years. Governments of all persuasions used to encourage people to do both these things. There was mortgage interest tax relief to help home buyers, and unlimited tax free savings within a pension fund for the prudent. Recent governments have removed the tax relief on home purchase, and now have retrospectively limited the tax relief allowed to people who have saved and invested well for their old age.

I want to see the tax system allow people to succeed. Business success, when someone builds their own business from nothing, is a fine thing we should wish to encourage. High income and capital gains tax charges put some off building their business, or encourage people to sell out early. Buying and improving your own home is also a good idea. Why then make it more difficult with high Stamp duties?

There is a lot to recommend New Labour’s tax settlement for the better off. They kept the Conservative’s top  rate of Income Tax at a maximum of 40% for most of their time in office. They cut Capital Gains Tax to 18%. These two rates were somewhere near the optimum rates from the point of view of the total amount of revenue collected.  There is plenty of evidence that CGT above 20% raises less, and that Income Tax above 40% loses revenue. People with high incomes and substantial assets are much freer than others to  move their domicile or place of  business. They are also free to do less,  venture less, earn less, if the tax rate goes too high. CGT is very avoidable. Many people refuse to sell shares from their investment portfolios above the tax free allowance. Many people are now sitting on second homes or BTL properties that they do  not wish to sell because they do not want to pay the tax. It is easy to see CGT receipts going up if we went back to Labour’s uniform rate for all assets of 18%.

Stamp Duties are  now at very high levels for the dearer properties.  Once a home goes above £925,000 the marginal Stamp Duty soars to 10%, or 13% for a BTL or second home. Over £1.5m the levels are 12% and 15%. In the Thames Valley I have seen some executive new build  family homes on modest sized plots on the market for around £2.5m. That would mean the family that buys paying £213,750 of Stamp Duty. In Central London in the dearer districts £2.5m would not buy you a house.

These rates should  be brought down.

 

 

If we are going to develop a better approach to taxing the better off, we first have to decide who is better off. One of the most difficult issues which tax policy has to face is the relationship between capital assets and income.  How do we feel about people who are asset rich but income poor, or people who are income rich but capital poor?

Let us look at some difficult examples.

Mrs Hardup  is a widow living in a one bedroom flat in what is now Chelsea – it used to  be Fulham. She lives on a state pension, with no savings or private pensions to top up what the state provides. She and her  husband bought the flat in the 1960s when it was much cheaper, and paid off the mortgage. Doing that got in the way of other savings.  The flat  is worth £1.2 million today.

Mrs Lucky lives in a Council bungalow on her state pension, but has recently won £1.2 million on the lottery. She has so far put it into cautious investments. She might live for another 20 years, so she could draw down and spend more than £60,000 a year depending on how well she invests the money. Alternatively she could buy herself a property, remove the rent  bill and pay herself a bit less.

Mrs Hardup decides to sell her Chelsea  flat, move  and  buy a small detached property near her daughter in Bolton for £200,00, leaving her £1 million to invest to provide her with an income well above the national average.

Mr Feckless retires early, sells his £1.5m southern counties executive house, buys a £500,000 smaller property, and spends three years on expensive cruises,  buying luxury cars and other consumption, using up much of his spare £1m.

Mr Prudent retires with a good  pension of £35,000 a year, and continues living in his £1.5m southern executive home. He is surprised by the choices of his former  neighbour, Mr Feckless.

Mr Whirlwind is in the prime of life and earns £150,000 a year. His income has risen quickly recently, and he has been too busy to get round to buying a home of his own. He pays a lot out in rent for the smart new property he has recently taken on, eats out most days and takes expensive holidays. He has few assets.

Do we have views on which of these, if any, is rich? Do people have moral preferences over who should pay more?  Should we tax income more, because it is available to be paid to the government as it comes in? Should we tax assets more, to make people reorganise their assets?