Author: johnredwood

Here’s a surprise. I agree with the three main political parties  in the UK that we have to tax the rich. They are right to say most of the tax has to be paid by those with the higher incomes and with more assets.  All three main parties have been living high on rhetoric about taxing the rich and closing tax loopholes for the last decade, and all three in power have decided to put tax rates up and impose new taxes on the rich. It’s certainly worked. The top 1% of Income taxpayers pay 27.5% of all Income Tax, and the top 25% pay 75% of all Income tax paid.  44% now pay no Income Tax.

Some of this is not  socialism but  commonsense. There’s no point setting out to extract tax revenues from those who have little income and  no assets. Even the steeliest state tax tyrant knows you can’t get money out of those who do not have it in the first place.

The issue between socialism and commonsense is how you tax the rich, and by how much. Socialists want to tax the rich because they do not like them. They do not mind if they tax them beyond the point where they leave the country or to the  point where they are no longer rich enough to pay the extra taxes. Sensible Conservatives want to tax the rich because we want decent public services and understand it is the richer part of the country that has to pay for the bulk of them. We want to tax the rich in ways which will coax the money out of them we need for a decent society, without taxing them so much that they leave, stop investing, decide  not to participate fully in the private sector economy for fear of having to pay more. We believe in the power of aspiration. Many people who start out with no assets and little income aspire to have assets and a decent income. Too much tax can blunt aspiration or thwart ambition.

This poses two questions. What is the right rate for taxing income and consumption of luxuries? Tax at too high a rate and you will collect less revenue and do damage to the productive economy. Tax too high and the marginally ambitious for a better lifestyle will conclude it is too difficult. What is the right balance over taxing things the rich do which are usually thought of as a good if others do it, like buying a home or investing in a pension fund.?

It is clearly right that we will only have a successful economy if the rich share their surplus somehow with those on lower incomes. We rely on the rich to invest in businesses that will employ others, to buy luxury items and services which others supply, to redevelop our cities and build new buildings. If they do not spend and invest enough willingly, the UK economy may be impaired. Germany’s refusal to share her massive surplus with her partners in the Euro shows what misery large scale underspending and underinvestment can create if the rich surplus holder is too cautious.

Taking some of the money off the rich in taxes does ensure more of it is spent, as much of this money is given to people on lower incomes as benefits or in the form of public services free at the point of use. Take too much and you may get the opposite effect, as the rich go elsewhere or adapt their behaviour to an even more cautious private sector pattern. If a relatively well off person feels their tax rate is too high, they may well spend less to conserve what money remains.

In subsequent posts  I will look at what this means for the detail of tax policy on income and assets.

Some of you want to talk about Syria and want to know why I have not written about it. The main purpose of this website is to raise issues I am pursuing for constituents and for the wider nation. The aim is not to mirror the concerns of the media all the time, or to try to repeat what they do. Nor am I going to post items which assert that the main news media have got this story of the missile attack factually wrong.

I aim to present news, not recyle olds in the way so many media journalists do. That is why I have wanted in the last few days to highlight Network Rail’s losses on derivatives and foreign currency borrowing, because you cannot see or read that elsewhere . That is why I have sought to provide background and new analysis to the policy work and exchanges underway over Gibraltar, Brexit and Scotland.

I have not so far sought to intervene in the recent debate about Syria. This is mainly a matter for the USA, the country that decided to take limited military action against the Assad regime. It does not look as if Mr Trump wants to get involved in a major way in the Syrian civil war, which is probably wise.

As I have pointed out before I do  not back either  Sunni or  Shia. I have no view on who could best govern Syrian and reunite it around a peaceful governing policy that can  bring  people together. I have no love of the barabric attacks on his own people by Assad, but nor do I have any time for one of his main opponents, the terrorist movement ISIL. I am also aware that there are other unpleasant murderous groups at large who also do not deserve our support.  I have heard previous UK ministers in the  Coalition argue we need to help so called moderate  rebels.  So far there is no evidence of a powerful enough group who could both defeat ISIL and Assad simultaneously and then rule a peace loving country thereafter. One of the reasons the West’s interventions have been sporadic and so far unsuccessful is trying to find a side we want to win the war.

Mr Obama threatened Assad  if he used chemical weapons but  failed to enforce his threat. Mr Obama allowed Russia to take a much more prominent role in suppport of Assad, making it  more dangerous and difficult for the west to intervene militarily.

I suspect Mr Trump will not wish to extend his  military involvement, and will hope Assad will now desist from using chemical ordnance. Presumably were Assad to use chemical weapons again there would  be further US attacks.  The aim seems to be to try to get more of the protagonists  into talks. Recent events will clearly disturb efforts for there to be more collaboration between Russia and the USA to fix world problems. Mr Trump hopes that Russia will  now exercise more discipline over Assad, and will see the need to seek a peaceful political solution to Syria’s riven factions in conjunction with others around the negotiating table. Let’s hope that works out.

Before the EU referendum the Scottish economy was growing far more slowly than the UK as a whole. From the 2008 crash to 2015 the Scottish economy only advanced by 4% in cash terms, compared to 23% for the UK. Since the referendum the Scottish economy has continued to underperform. On the latest figures the UK is growing around 1.2% real more per annum than Scotland, with the Scottish economy in danger of stalling.

It clearly isn’t the EU referendum doing that as a few would suggest. It is a longer term Scottish  trend. Part of the reason is the decline in oil output. The North Sea fields are in decline. As oil volumes and revenues tail off, so that has knock on effects to the supply industries and the service sector that has lived off the oil industry where it is strong.

Recent figures show disappointing results for manufacturing as a whole, and a weak balance of payments. Scotland spends more per head in the public sector than England. Scotland borrows more as a percentage of GDP to support public spending than the UK as a whole. If larger deficits and higher public spending made for more growth , Scotland would have a more successful economy than England. It does not seem to.

I would be interested in views on why Scotland has been lagging, and what the Scottish government can and should do about it. The SNP live on the fact that the Scottish average GDP per head is  not too bad compared to the UK and European averages, but this relies on the residual advantages of a declining North Sea oil sector and past achievements from pre the 2008 crash. They need to answer more of the questions about the disappointing performance over the last decade when they have been in office, and to explain why so far their approach has not even succeeded in getting Scotland back to the average growth rate for the UK as a whole. The crash of course hit the high value added financial sector whose Investment Bank activities were concentrated in London, but this has  not had the same impact on the London economy as the oil decline on the Scottish one.

The modern railway is based on a cruel paradox. Some of its routes into the main cities are too popular at peak times, with overcrowding.  The commuters are made to pay premium prices for what can be an inferior service. Many other routes have too few passengers, and those who do travel often benefit from heavily discounted or off peak prices well below the costs of running those trains.

We need to solve the problem of too little capacity for some, and too much capacity and too little revenue from others. What should  be done? Commuters naturally think it unfair that they have to provide a disproportionate part of the fare revenue in what remains overall a heavily loss making or subsidised business. Other travellers often do  not appreciate just how large a gap there is between what they pay to travel and the costs of providing the train they use.

The problem of capacity may be easier to solve than many think. According to the railway management they can typically only run 20 mainline trains an hour on any given line. At peaks there are still large gaps between trains on uni direction track. Poor signals, poor brakes and heavy trains mean the safety margin required to stop a train in time leaves much of the track empty. Modern digital signalling could alter that. If a train is equipped with on board signals and sensors, and automatic braking where needed, it is possible according to railway experts to run 30 trains a hour safely. That is a massive increase of 50% in capacity. It also means a service which at best is one train every three minutes becomes one train every two minutes, more like the tube. If new trains are built out of lighter though strong materials, and equipped with better brakes, there could be further improvements.

I have been urging the government and railway to get on with digital signal investment. They have now established a larger fund to tackle the five most overcrowded routes into London. I am asking them to do more, as so many commuter routes into major cities are afflicted.

Getting more people to use the trains off peak and on longer routes does not have such an easy fix. There needs to be more analysis of why people travel and what they want to get out of it. We need timetables that offer good services more geared to the pattern of passenger needs, and sensible pricing which offers a discount for off peak but does not simply dump seats at prices well below marginal costs.

The Supreme Court upheld the law which states parents must send their children to school during term time unless they are ill or are being home educated to an agreed standard and programme.

Some think this is an unreasonable interference with parents who may have other ways to bring up their children. They believe children can learn outside school as well as in, and think that sometimes a child could benefit from travel during term time.

Others, including the Supreme Court, think children are best advised to follow the full courses offered by their schools. Missing a week or two in a busy term would mean the child has to catch up somehow on the lessons and exercises missed. Teachers do not welcome having to make special provision  for children who missed the first explanation and the work on the new topics introduced when they were away. Of course they need to help children who have been off sick for a time period to catch up, but they usually do not want to increase the numbers and incidence of this remedial task. They point out that schools offer quite long holidays allowing families time off with their children.

The father who brought the case now says he has the money to send his child to a fee paying school, where he thinks he could get a better agreement with the Head teacher. He says he is bringing the case for all those who cannot afford this option. It is true that limiting families to travel in school holidays allows travel companies to charge more for these peak periods. In the  case of the summer holiday in the UK the school time off also coincides with the  better weather which would attract premium prices anyway.

Parliament intended the law to require parents to send their children to school in term time. The Court has upheld the will of Parliament.  Do any of you think that wrong?

Some are writing in stating that Mrs May is making concessions before the formal talks begin and complaining about this.

The Prime Minister’s approach is to make major statements of her position in the form of speeches or press conferences and statements to the Commons. Her position on EU matters is as defined  by the Lancaster House Speech and the latest Statement and White Paper at the time of sending the Article 50 letter.  The PM does  not usually brief the media or press to provide a running commentary on the prospective talks. There will be plenty of wrong stories put round by Remain supporting people and institutions, and much  speculation based on conversations with senior officials or Ministers not in the loop, which cannot  be relied on.

We learn from the voice of Alex Salmond and from briefing to papers that the SNP  have altered their approach to the EU. Apparently they will now say that were Scotland to have a formal vote to leave the UK, and were voters to vote to leave, Scotland would apply to join EFTA, not the EU, in the first instance.

This new contortion of policy probably is based on the unpopularity of the EU with a significant part of the SNP’s vote, those who also voted to leave the EU. It helps them get round the painful issue of having to join the Euro as a new member of the EU. It avoids too many issues about long delays in joining the EU. The EU has made clear that if a part of an existing member state becomes independent, that new state has to apply to join from outside the EU.  Scotland would meet the main requirements to join as it is already part of  a member state. However, it would not qualify for a share of the UK’s budget rebate, nor automatically achieve opt outs from the common borders and single currency policies.

Scotland  would need to establish Euro convergence, which would require a very large contraction in its substantial budget deficit. Outside the UK Scotland would start with larger deficit than the UK’s, and would need to cut spending and or raise taxes to get within the Maastricht rules. These are unlikely to be palatable to SNP politicians. They do  not like austerity policies, yet these would be serious Euro style austerity policies with considerable bite as the southern members of the Eurozone can testify.

At the same time Catalonia is pressing for her first official independence referendum. She would welcome one chance to be independent of Spain, and is jealous of the democratic approach of the UK in granting such an opportunity to Scotland. Catalonia is more likely to vote to be independent should a meaningful vote be held.  Spain has had to accept that Catalonia, like Scotland, would be able to apply for EU membership if out of the Spanish Union, if that was their wish. Whilst the government has not ruled out use of the veto over theoretical Scottish EU membership, it seems likely now that Spain wants to avoid having to wield the veto. Indeed, Spain still prefers the idea of not allowing Catalonia an official referendum, in the hope that this will keep her Union together.

Spain is on the undemocratic end of more than one of these issues of identity. The UK once again did the decent thing over Gibraltar, as over Scotland. It asked Gibraltarians to vote on whether Spain should share sovereignty over the territory. By an overwhelming majority Gibraltar said No. Had it gone the other way the UK would have implemented the people’s wishes. Spain’s pressing to have some say over Gibraltar’s new relationship with the EU on UK exit is not going to change Gibraltar and the UK’s approach to sovereignty and identity. Spain’s argument that geographical contiguity is sufficient cause to give her sway is not borne out by her actions over Ceuta, nor by general international law.  France has no right to the Channel Islands because they are closer to France than the UK. Spain holds on to Ceuta though it is on the other side of the Med.

The EU has to be careful about these tangled webs of identity.  Its policy that states created out of parts of member states have to apply anew from outside makes sense. They also need to help uphold international law over  borders and self determination of peoples. After all, the EU prides itself on democracy so it should proceed by referendums on these matters to reflect the wishes of the people affected.

The Prime Minister was right to say that. Those who think leaving is a complex negotiation should grasp that we would  not have a negotiation  unless we are   willing to walk away. We would have dictation by the other side.

Fortunately the PM understands the strength of the UK position, and understands that No deal would work better for us than for them. It would be a lot better than a punishment deal of the kind some in the Commission have flirted with.  In reality it need not be a negotiation at all. It is a series of choices for the rest of the EU, where a friendly and positive UK offers them various advantages which they may or may not want to take up.

If they take up none of our offers when we leave we will  be like most of the other 160 countries around the world that are not part of the EU. We will trade with the rest of the EU on WTO most favoured nation terms, just as we trade with China, India and the USA today. We will no longer have special sharing arrangements on defence and Intelligence, other than through our common partnership in NATO. We will impose WTO tariffs against their agricultural exports to us, with the options of growing more at home and inviting in more produce tariff free from elsewhere in the world where it suits our industry and consumers.  We will reclaim our fishing grounds. We will spend our own money on our own priorities.

The UK is making a positive and generous set of offers. We are proposing that the rest of the EU keeps tariff free access to our lucrative market, with  no new barriers of other kinds. They just need to agree the same for us, and they can carry on exporting so much more to us than we sell to them.

We are proposing that the UK continues to share its Intelligence with them, and to make a contribution to European defence and security initiatives and commitments.

We are proposing that the UK develops a number of friendly collaborations and partnerships in science, education, joint investments and the rest.

These need not be negotiations. They are choices for the EU to make. If they are sensible they will wish to maximise the contribution the UK makes and the access they have to our market. I remain an optimist, thinking well of our partners and expecting them to take the offers that are so manifestly in their own interest. If  by any chance they do not, the UK will  be just fine. Accepting the very limited tariffs on our exports allowed under WTO rules would  be much cheaper than the mountainous bills some have in mind for us to pay. The tariffs we imposed on their exports to us would be much larger and could be given back to UK consumers and businesses as compensation.

If we get a decent free trade Agreement between the UK and the EU I do not expect them to ditch it at the last moment because they wish to advance Spain’s claim to Gibraltar. Gibraltar’s sovereignty rests with the Gibraltarians, who have made clear their wish by overwhelming vote to remain attached to the UK.