Author: johnredwood

We were told the new Chancellor had discovered a £22 bn black hole in the inherited budget. The Treasury officials who had prepared and signed off budget 24-25  decided a few months later it was £22 bn short. Over half of that alleged shortfall was the new government decision to offer higher wage awards to a range of public sector workers without securing any compensating productivity improvements. The last government had for example been seeking material improvements in rail productivity before settling the drivers dispute.

Now we read in briefings to the press and BBC that the Chancellor thinks she has a black hole of £40 bn. That is a very rapid rise in two months. It appears she wants to make a series of previously unfunded increases in spending . This has led her to scramble around to find offsetting tax rises to pay for them.

In other words Labour misled us badly with three tax rises stated before the election to pay for three specific items of spending, when they planned something much larger. Taking the extra £18 bn is an increase in spending and taxing more than three times the one put forward for the election.

Labour says this is to stave off austerity. They have a very strange definition of austerity. Apparently austerity is having some areas of public spending that do not get a real terms increase. Most people think austerity is tax rises and real pay cuts for themselves. It’s finding the pay runs out before all the family bills are paid. The public sector has had a large increase in staff and money in recent years. The issue government should be wrestling with is how to boost productivity and improve service, so employees can get increases in real pay and taxpayers get a better deal.

The government announced £63 bn of investment following a one day event at the Guildhall. Much of it was familiar projects that companies have been working on for some time. Almost 40% of it was Scottish Power plans for more grid and a power cable link from Scotland to Yorkshire. Almost two thirds of it was investment in renewables and grid in pursuit of net zero.

Scottish Power is  down for £24 bn over four years. Last year it invested £1.8 bn, well up on the previous year. To do so and to pay a £1.25 bn dividend to its Spanish owner it added to its net borrowings. We are invited to believe it can treble its investment rate over the following year and sustain that for four years. How does it pay for that?

The problem with this heavy investment in green transition including £8 bn in carbon capture and storage is it will not add much to GDP after the build activity, as the extra power is needed to replace closing nuclear and gas stations. Renewables  need extra  grid and storage but as the government tells us they will be cheaper than gas or nuclear that would reduce GDP.

The government looked very unprepared for this Investment Summit though it was an idea the previous government started and the new government has been talking about it for months.If you want a growth strategy you should as a government have drawn up a bigger list of key infrastructure items we need where government plays a big role.  Where were the road schemes, the new reservoirs, the new and larger water and sewer pipes, the broadband capacity, the new rail capacity, the flood schemes , the advanced all weather fruit and vegetable schemes and the rebuilt U.K. fishing fleets? Where is all the extra housing and infrastructure needed to provide for hundreds of thousands of new arrivals every year?

There are so many more opportunities to grow where government is needed to offer planning permissions, licences and in some cases part of the investment finance. The £64 bn is a very limited list, with a few good private,y financed data centres as a welcome addition.

Today facts4eu.org publishes good research showing how much more we would be paying if we were still in the EU. We would also be responsible as members for their big build up of debt. The last thing the U.K. needs is a further debt burden.

See https://facts4 eu.org/news/2024 oct Brexit saves rachel reeves

The Middle East conflicts between Iran’s proxies and Israel are difficult to end. The two sides have understandable  aims and also  aims that are incompatible with peace. Neither is yet willing to compromise sufficiently to secure a negotiated settlement.

Hamas and Hezbollah are hybrid parties. Both have extremist terrorist wings. The extremists  want to drive the Jews out of Israel. They are happy to murder civilians, take hostages, keep military men and weapons in hospitals or schools and embed armies in civilian areas to make it difficult for Israel to counter them

There are more moderate Palestinians who want an end to civilian deaths in the war, an end to Israeli settlements spreading, the complete withdrawal of Israeli troops  and the creation of a Palestinian state.

There are Israelis who think there can be no peace for Israel until all the Hamas and Hezbollah terrorists have been killed, all the weapons destroyed and Israel plays a part in policing Gaza and parts of Lebanon  to prevent  their reintroduction. They favour continuing the use of great force until the terrorists have been eliminated. If this also involves pre emptive action against Iranian nuclear installations and missile capabilities, so be it.

There are more moderate Israelis who want their hostages home,  and some negotiated peace that gives them some guarantee of no more rocket attacks.

In order to pull off a ceasefire followed by a peace the  Middle East and US interlocutors need to get the moderates on both sides to hammer out a common approach and to marginalise the more extreme elements. This is not proving easy. it also leaves open what the Iran facing terrorists might do to upend a peace.

The US and Iran both have considerable leverage. Iran could instruct her proxies to stop sending missiles and terror groups to Israel but  does not want to. The US can influence Israeli military activities by offering help as with the shooting down of incoming missile attacks when the two are aligned, or witholding weapons and support if Israel goes too far in her aggressive responses.

US foreign policy was altered substantially by Joe Biden when he became President. He  dropped the Trump strategy of creating a strong alliance between Israel, the US, Qatar, UAE and Saudi Arabia against Iran. He relaxed the attempt to starve Iran of money by sanctions to make it more difficult for her to finance an arsenal against the democracies, to train and arm proxies  and to develop a nuclear weapon. President Biden decided to join  the EU in trying to get a negotiated settlement with Iran, but failed. More recently Joe Biden has been trying to reconstruct the US/Arab/Israeli alliance against a background of Arab states hostile to Israeli military activities against Palestinians.

I listened to the BBC radio account of the Brighton bomb. It was not quite as I remember it.

As Margaret Thatcher’s chief Policy Adviser I was with her at Brighton.We worked on the speech into the night, ending the session a few minutes before the explosion. My room, 114, was close to hers but on the side of the hotel where her suite was at the front. I had got back to my room and was preparing for bed when there were two loud bangs. It sounded like two bombs, but the second must have been the collapsing masonry. My room survived.  The emergency services then came up the rear fire escape and hammered on my door telling me I had to leave the building. When I opened the door it was an eerie scene. Some lights had stayed on. The damage to the main centre of the hotel was unclear as there was a dust cloud still settling. I got out by the rear fire escape and walked  along the sea front thinking about what to do. Outside the full enormity of the attack was more visible and I then realised with horror and grief that people must have been killed or injured. I had to ring home to let my children know I was safe. This was pre mobile personal phones. I  needed somewhere to sleep and keep warm.

The BBC said Margaret reconvened with her media man, Robin Butler. Robin was her civil service Principal Private Secretary so he did not help with the speech or event. This  was a party event. I was there to help shape the government policy content to ensure the speech did keep to government policy in its non political passages as it needed to be a statement of government intent as well as a party speech.

Margaret was taken away from the scene. Later that morning I connected with her via the  always excellent No 10 switchboard. Margaret and the  small speech team agreed the conference would continue and we proposed a new introduction referring to the bomb and explaining it would not  change the speech or conference. I had managed to borrow a bedroom in another hotel to catch a couple of hours of sleep from a friendly journalist who had enjoyed a sleep before his paper told him to get up and file on the story of the bomb.

All wars end with negotiated peace treaties if one side is unable to invade, take over , remove the government of the other and run a military occupation. It now seems clear Ukraine cannot invade and occupy Russia and very unlikely Russia could capture and control Ukraine.

Russia has almost achieved her likely minimum objective for the war, the capture and occupation of a strip of land from her border to Crimea, seized  in a previous invasion. Ukraine has occupied a small part of Russia as a bargaining counter.

When Russia took Ukraine she held a referendum which showed strong support for Russian rule. There was no independent observation of whether this was fairly conducted , leaving Ukraine and the  West complaining of an illegal seizure. The general response was weak,  allowing Russia to assume they had got away with it, to wait their chance to win back some more.

A negotiation would be about the extent of territory that Russia has occupied that  they should retain. For both sides to get something out of the peace it seems likely the settlement would have to allow Russia to keep Crimea and a strip of land to the Russian border. The extend of that strip could be influenced by the views of the people living in the occupied lands, as it would be clearly better if people not wanting to live under Russian government did not have to. There would then need to be better security guarantees for Ukraine against further Russian incursions at a later date. So what are the UK’s options?

1. Prepare a peace plan and take it Washington immediately after the Presidential election, having talked extensively to Ukraine first. If it is President Trump, work with him on a good peace plan and help him assuming his plan makes sense. If it is President Harris persuade her current policy is not working. She needs to change tack as soon as she is elected and may entertain a peace plan.
2. Allow current policy to continue but start to distance the UK from  it, as it is clearly not going to work. The UK could point out it has given disproportionately to the cause and expects France  to take over its role of major donor and supporter. This is a crisis which matters more to the EU and arises in part out of EU actions prior to 2014. It was primarily of course caused by an illegal Russian invasion. The UK budget position argues for us spending less and  being less exposed to this conflict.
3. Continue as we are.
4. Work behind the scenes to get allies led by the US to think through a better strategy for helping Ukraine whilst seeking to ensure it remains a Ukraine/Russia war and not a NATO/Russia war. It is difficult to know what this might look like and will be riskier and entail more UK commitment.

I favour the first option.

The present Uk government has so far not changed policy towards Ukraine and the Middle East. Why?

UK policy towards Ukraine is to provide financial help and to supply weapons. Taken together with the US and NATO we supply enough to keep the war going but not enough to allow Ukraine to win. We seek to keep the war on Ukrainian soil and limit use of weapons in Russia. The new government has not succeeded in urging the US to allow wider use or the supply of more effective weapons against Russia though it is said in the media Starmer went to Washington to try this. The wish to avoid a NATO/Russia war is an aim most back, which should lead to other ways of handling this conflict.

The U.K. does not try to get France to make a serious contribution to financing and arming Ukraine in the way the U.K. and Germany do. The US is the dominant military support. There is no suggestion of any negotiated peace or ceasefire. The western governments and media give little coverage to the high daily death toll, the strains on the Ukrainian army or the continued destruction of property. There is practically no discussion  of the millions of Ukrainians displaced from their homes.

In the  Middle East the U.K. government regularly calls for a ceasefire and negotiated peace. So far neither the Israelis nor the Hamas/Hezbollah forces have  any wish to talk peace. Hamas will not release the hostages, Hamas and Hezbollah keep firing at Israel where they can and Israel continues her military actions against both which entail bombs and street fighting in crowded cities amidst a civilian population. All sides demand the other stops without stopping themselves. The U.K. has limited the small amount of defence goods it will send Israel and does not send money. It will offer limited military support to help destroy incoming drones and missiles aimed at Israel.

We leave the main job of trying to keep open shipping lanes and defend oil installations in the Gulf area to  the US navy who have a carrier group and an assault ship with planes in the region. We decline  to commit one of our carriers though have sent a destroyer and other vessels.

Neither of these approaches to conflict is working. In both places the death toll is high and civilian populations are hit by the bombs and bullets. I will discuss other options in future blogs but am interested in how you think Starmer and Biden should handle these crises.

       I do not take sides in another country’s election ahead of the vote.I tuned in to hear the BBC Question time special from America on the Presidential election, hoping to learn more about the policy issue divide.  Knowing they rarely allow Conservatives at home to make our case on their programmes I hoped for better abroad.

It started well. They had allowed two Republicans as well as two Democrats to form a balanced panel. At home they often choose a Conservative who is not conservative, and often weight the panel to the left. Fiona Bruce seemed to want both sides to be heard.

The programme bias was however persistent and insidious. The first question which set the tone for the whole programme was  about character.In other words the main Democrat campaign theme and issue that Trump’s past deeds and words mean he should not even be a candidate led the programme. Whilst Fiona Bruce did ask for comments on Harris no one was brought in to balance the debate. The well known issues of the Capitol riots, conduct with women and use of language were often aired against Trump. None of the Republican attack lines on Harris over dodging interviews, needing  autocues and flip flopping from previous positions, let alone her record in power were used.

Over the course of the programme Fiona Bruce did sometimes interrupt the Republicans trying to explain their candidates policies to put specific Democrat charges about Trumps past views and conduct. She never did the same to Democrats with anti Harris material.

A neutral outsider as the BBC should be could  have lifted this debate and helped us observers gain more insights into the two offers. Why no questioning of how Trump would get peace in Ukraine and Gaza? No questioning of how Biden/ Harris cannot get their allies to do as they wish, nor offer a path to peace in either conflict. No discussion of who was to blame for the big inflation in the US under Biden/Harris and how the competing economic policies might affect that. No wish to reveal that transition to net zero is on the ballot paper or to explore how Harris/Biden have got more oil and gas out despite green ambitions.Not even discussion of abortion where Democrats think they have an advantage or of how to treat foreign criminals where Republicans have strong views.

The programme did not allow explanation of Republican aims and policy changes and did not explore the policy success and failings of Harris in office because it was all consumed by the issue of Trumps  personality. The US is split 50/50 over whether to have Harris or Trump. As interested observers we need to know more about what either would do in office and leave judging their characters to those with votes in the election.

The good news is the government wants to change the OBR controls. The bad news is they will probably put in new ones that are no better.
The OBR was set up in  May 2010. The underlying objective was to control the build up of state debt. There was no thought about how to promote growth or to control the tax level.

On its own terms  it has catastrophically failed. State debt has ballooned to 100% of GDP from 65% of GDP. The economic policy the OBR has required has also delivered high taxes and slow growth.

This is not surprising. The whole OBR construct was a Treasury officials structure to get the U.K. to meet its Maastricht Treaty debt and deficit requirements. Successive reformulations always kept the underlying EU control of wanting us to keep our annual deficit below 3% and our stock of debt below 60 % of  GDP. This bad framework failed in most EU countries with many running up even bigger debts than the U.K. and having  slower growth than we achieved.

I have long argued for the OBR to be truly independent, selling its forecasts to those who value them. I wanted a government twin aim economic policy based on a 2% inflation target and a 2% growth target. I have always proposed a lower level of total public spending setting out where I would reduce. Today the three big areas remain lower Bank of England losses, a strong policy to return to 2019 productivity levels in public services and a better back to work policy to reduce benefits and boost tax revenues.

OBR led controls have obviously failed yet the government remains wedded to them. Why does the OBR go on pretending this system can control debt and deficits when it has spectacularly failed and when their deficit forecasts are usually tens of billions out? .

I think tenants do need decent legal protections against bad landlords. They should not be evicted without good reason or against the terms of their lease. They should expect timely repairs and decent standards of accommodation. Rental increases should be set out in contract and relate to market conditions and costs.

I also think good landlords need protection against the small minority of bad tenants. If a tenant has money but refuses to pay or is misusing housing benefit there needs to be redress. If a tenant damages the building other than by accident or fails to keep their maintenance obligations under the lease there needs to be a way of resolving it.,

I see nothing wrong with a landlord and tenant being able to agree a short hold tenancy to be terminated by either at the end date without further reason. If the new legislation swings things too far against landlords then we know what will happen. More landlords will decide to abandon letting out property, cutting the supply of private rented homes. This will tend to take rents higher and cuts choice for tenants.

Scotland is already experiencing this unfortunate outcome. Paris discovered rent controls cut choice and drive rents higher. Of course if a landlord withdraws their property the property is not lost. However some will cease renting but keep the extra  home for family and leisure use. Others will sell the  property to a new owner occupier, cutting rental choice.