Author: johnredwood

Inflation has risen by similar amounts in Europe, the UK and the US. Yesterday the Euro area figure for April hit 1.9%, compared to minus 0.2% a year earlier. German inflation reached 2%, compared to minus 0.3% a year earlier. UK inflation at 2.7% compared with plus 0.3% a year ago has risen almost identically to German inflation over the last year, implying the UK inflation is not to do with sterling or Brexit as some allege.

The annual UK figure for April inflation at 2.7% reflected higher energy prices over the year. 30% of the price rise came from transport, with a surge in airfares for Easter a particularly strong item for April, and higher Vehicle Excise Duties adding to the pain. 22% of it came from household items, where Council tax rises and dearer electricity were two of the big movers. Motor fuel prices fell a little, after being the dominant cause of inflation for the last year.

There are no signs of a wage/price spiral developing as it used to do in the last century. There is not much evidence of companies pushing through price rises to offset the fall in sterling that has taken place over the last two years, though where they can companies seek a small rise as some compensation for general cost pressures. It is interesting that on both sides of the Atlantic with differing patterns of currency performance, the rise in inflation has been so similar. It mainly reflects energy and commodity prices, with some price pressures from China on her exports. Later this year unless there is another oil and commodity price surge, inflation might fall back a little.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

Labour’s Manifesto was even more socialist than the leaked version. Nationalised water companies were added to the purchase list, alongside a nationalised Post Office, new nationalised regional banks, regional public sector energy companies, the gradual renationalisation of the Grid and nationalised train companies. This large programme of changing ownership is not costed.

The Manifesto aims to raise £48.6bn in tax and to spend it on other items. Companies would face a big tax hike on their profits, new taxes on highly paid employees, taxes on buying assets and derivatives. The better off would face a 45% tax charge at £80,000 a year and a 50% tax charge at £123,000. Public debt would be likely to go up much more rapidly than under current government plans to pay for investment, nationalisation, and any shortfall in revenues.

The problem with the arithmetic is it assumes very rich people and companies will stay and pay. It assumes rich people with flexibility will still work and invest as hard, and that companies will still build up more profitable business in the UK when other countries offer them a lower tax background to expand. Given the strong growth in corporation tax receipts seen in recent years in the UK as the rate has been lowered, it is dubious to think there would be further major growth in revenues if the rate were raised so much. Given the good growth in the amount paid, and the increase in the proportion of income tax paid by the better off with a reduction in the top rate from 50% to 45%, it is again questionable that Labour’s plan would work on Income tax either.

There are even bigger numbers on capital account. A £25bn a year investment programme is specified, though much of this is projects already underway out of budgets already secured. Presumably on top of that is the wish to set up a National Investment Bank which in turn would be able to lend £250bn for suitable projects. The taxpayer would be standing behind the bank and the projects if they miscarried.

Labour say they “accept the referendum result” and say they will get on with legislating to get the UK out of the EU. They wish, however, to negotiate their way back into the customs union and many other features of the current EU scheme. They would guarantee the rights of all EU citizens in the UK before the EU made a similar reassurance for UK citizens living in the rest of the EU. They are silent in the Manifesto over UK payments to the EU, though elsewhere they have implied they think the UK does have to pay some bills the EU dreams up that have no legal base in the Treaties. None of this makes for a strong negotiating position designed to give both the UK and the rest of the EU a good Brexit. It is in the interests of both sides that we have a good future relationship. The UK being firm as well as friendly is crucial to delivering such an outcome.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

The UK General election is both about who should lead our country for the next five years, and what kind of a country we want to create. It is an unusually important election, because the UK has great opportunities now it is leaving the EU. We need to leave in a way which brings more people together in our country. That requires reassurance to all that we are leaving the EU, not Europe. None of us want to damage our economy. We are not out to undermine the many friendly and positive collaborations and friendships UK people and companies share with the continent. We do not wish to turn inward. More than ever the UK needs strong and stable leadership, to negotiate a decent future relationship with other EU member states. I want to see an outward looking, optimistic UK, engaged in the wider world and a pioneer of freer trade on a global basis.

As the official Brexit campaign argued, the UK will not use our departure to undermine the employee protections embedded in EU law. The Conservative leadership has stressed that all existing minimum standards and protections will be transferred into UK law. As governments of all persuasions have in the past, so a future Conservative government wishes to go further than the EU standards. As the Labour party also supports this approach that should be one fear of Brexit removed.

So far there has been no downturn as forecast by some in the Remain campaign who thought the act of voting for Brexit, or the sending of the letter, would bring on an early recession. There is no need for there to be so once we do leave, either. An important task for the new government will be to extend and improve the economic recovery. So far since the banking crash and slump of 2008-9, we have seen good job creation and moderate growth. Setting the right tax rates, allowing sensible levels of public spending to improve the NHS, schools and other crucial services, and creating a climate friendly to investment and enterprise is central to building on what has been achieved since 2010.

There is no such thing as hard or soft Brexit. Remaining a member of the single market is not on offer. Being in the customs Union would prevent us having better arrangements with the rest of the world. It is mightily in the interests of the other member states to have a free trade agreement with the UK, so that may well happen. If it does not in time for our exit, we will be able to trade with them under WTO rules as we do with the rest of the world at the moment.

As we come out we need to legislate for a new UK fishing policy kinder to both our fish and our fishermen. We need to set up a new system of agricultural support, that is sensitive to the UK rural landscape and helps promote more domestic food production. We can get rid of EU taxes we do not like.

I think in a few years time we will have more and better friendly contacts and partnerships with people and companies on the continent. Just as staying out the Euro allowed the City to be Europe’s major fund raising market, so being out of the EU will not impede more trade, investment, academic and cultural exchange. Our future relations will rest of the good will and commonsense of people on both sides of the Channel, not on the sometimes unhelpful words of a few EU officials.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

There is a lot of disinformation about rises and falls in the pound. Some would have you believe we had a stable and strong pound prior to the Brexit vote, and then it fell. The truth is somewhat different.

The crucial cross rate is the Euro rate, given the volume of imports we take from the EU. Sterling fell a lot during the banking crash of the last decade. On 3rd January 2009 it fell as low as Euro 1.04. It rallied in the next decade, typically trading around Euro 1.20 in the period 2010-2014. It hit a low of Euro 1.16 in February and August 2013.

By June 14 2016, just before the vote, it was around Euro 1.25, having been higher in previous months. Today it is at Euro 1.18, just 5% down on the June pre vote low. At today’s level, after rallying in recent weeks, it is around its average earlier this decade.

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

Mr Macron promised to rebuild the Franco-German alliance and to seek to strengthen the role of the EU in his country. To do so he has to fly to Berlin to show Mrs Merkel he agrees with her and will be helpful to her prior to the German election.

He will find in Berlin beneath the public courtesy a very different view of what the problems are, let alone what the future answers should be. There will of course be some goodwill born of relief that Mme Le Pen failed, but the reality of German interests will soon reassert.

The main German preoccupations will be to avoid any new spending commitments by the EU that Germany might have to pay for, and to keep the austerity pressure on the heavily borrowed countries of the Union. France will want to speak for a higher spending and borrowing federal EU government which Germany will dislike. Both countries say they want a political union, but France wants that to include sharing the money whilst Berlin wants it to be governed by teutonic controls on spending, borrowing and printing money.

Mrs Merkel may offer her new suitor warm words, but is unlikely to loosen the German or EU purse strings. Germany will be conscious that her 830 bn Euro deposits in the ECB are already lent on at no interest to countries who will struggle to repay.

Published and promotoed by Fraser Mc Farland on behalf of John Redwood both at 30 Rose Street Wokingham GR40 1XU

The latest report from the MPC of the Bank is as muddled as ever. They record that their February forecast was too optimistic on growth, too pessimistic on unemployment, and got inflation wrong. This time they have boosted their ideas of Uk growth next year and the year after to more realistic levels, but taken 0.1% off this year after big upwards revisions last time.

They keep referring to inflation going up thanks to lower sterling, and trying to find a Brexit related explanation to other changes. It’s as if they forget we are in an active global economy with many linkages to the world. They did not ask themselves why UK inflation has gone up about the same as German and a bit less than the US. They forgot that dollar oil price rises underlay much of the US inflation, just as it underlay inflation in other countries that had not had a fall in their domestic currencies. They seemed to fail to make the link between weaker first quarter growth in the Uk and also considerably weaker first quarter growth in the US where the currency has been strong and in most of the Euro area.

Weak first quarters on both sides of the Atlantic owed much to a mild winter hitting energy output and demand. Higher inflation in most places was related to the oil price and general commodities. This quarter oil and commodity prices have fallen, the pound has risen and in the UK the weather has been colder for the time of year. All this points to another change of direction for inflation and output.They asked if weak UK cars sales in April means weak consumer confidence. Surely it is instead the response to large rises in VED in the budget which may reduce sales for more than one month, just as Buy to Let taxes are still hitting the second hand homes market.
It looks as if there will continue to be a synchronised recovery in the main economies. It is difficult to see much sterling effect on prices given the way UK inflation has moved as in other expanding economies with stronger currencies. It is also difficult to see why Brexit should have the impact on the Banks forecasts, as they helpfully assume a smooth Brexit as their base case.

I do agree with their decision to put up their output forecasts for the next two years, and their upward revision to employment.

Published and promoted by Fraser McFarland on behalf of John Redwood, both at 30 Rose Street Wokingham RG 40 1XU

Critics of Brexit on this site have regularly alleged that if we do not get the same access arrangements as today to the EU market after Brexit, the City will lose jobs and business to the continent. I have been accused of complacency for thinking that is untrue.

I have pointed out we were told the UK would lose jobs, influence and business if we refused to join the Euro. We did decline to give up the pound, and our business in Euros grew substantially. Attempts to prevent clearing in London failed, as of course if you run one of the world’s large trading currencies you cannot stop non members of your union trading the currency and securities in it. Business goes to where the talent is and where the capital to execute the transactions resides.

This week there has been a most important statement from the CEO and Chairman of one of our major banks. Barclays has said that they do not see any need to transfer personnel from London to elsewhere on the continent, whatever the outcome of the Brexit talks. They also state that the technical changes they are making to ensure continuity of EU business are less complex than the changes they had to make last year to comply with new business rules in the US, or the large task of ring fencing their commercial bank in the UK to comply. They confirm that complying with any new EU arrangement will be cheaper as well as easier than these changes.

London out of the EU like London inside the EU will face competitive challenges from all round the world. IF you are good at something you need to get better at it to maintain your position. You constantly have to strive to improve and to keep up with or lead change. There is no reason why London should stop doing that once we are out of the EU. In some ways it will be easier, because we will be free to decide on our own arrangements with the rest of the world without having to adopt the EU model for that. The UK will regain its vote and voice in the global talks and formal bodies, where today we often have to be represented by the EU instead.

As Barclays said “We are confident we have multiple choices for how we might continue to serve our customers and clients regardless of the outcome. (Of Brexit)”

Published and promoted by Fraser Mc Farland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU

There is general agreement in Wokingham and West Berkshire that our local schools need some more money. Just before Parliament was dissolved for the election, the government published proposals for fairer funding. The idea is to narrow the gap between the best financed and the worst financed schools by changing the formula for financing them.

I look forward to the government’s response to the consultation, as there could be improvements to the formula they proposed. I argued the case for more cash in the last Parliament.

It will be important in the new Parliament to find additional money for education in the years ahead to benefit all state schools. We want good provision for teachers and for all the support staff and buildings it takes to provide a good education. This can come from the proceeds of growth, as tax revenues rise with a growing economy. The best tax collector is growth and success. Often the worst tax collector is higher tax rates, which may curb growth and lead to loss of revenue if ill judged.

I will take the argument to Parliament if elected to find more money overall for schools, and to offer a better share to the lowly funded areas like Wokingham and West Berkshire.

Published and Promoted by Fraser McFarland on behalf of John Redwood, both at 30 Rose Street Wokingham RG40 1XU