Author: johnredwood

As the new government sets out its aim to put prosperity first, and to spread higher incomes and wealth more widely around the country, it needs to alter energy policy.

Fundamental to faster growth and higher real incomes in the UK must be more and cheaper energy.

Scrapping VAT on domestic fuel as Vote Leave proposed would be a welcome start. People on lower incomes are particularly hard hit by fuel prices and taxes.

The decision to put Energy into a new Business department led by Greg Clarke is a good idea. It is important to understand the need for lower priced and more plentiful energy to business. The department needs to get to work on a new regulatory framework which will ensure more baseload gas combined cycle electricity generation. The UK also needs to tap into more of its reserves of oil and gas.

The loss of steel, aluminium, glass, ceramics, basic chemicals and other areas has reduced our industrial base. This has been speeded by dear energy.

With a background of very low interest rates and a plentiful supply of new bond finance, it should be possible to make faster progress with providing the new power stations and energy facilities we need. Out of the EU the department can review energy policy to ensure continuity of power supply, sufficient capacity, and more affordable prices. It was interesting that Theresa May reformulated the aims of energy policy in her economic speech just before becoming Leader. A new fleet of combined cycle gas stations may be the best way to offer industry the cheaper power it will need to expand, and to rebuild industrial opportunity across the country.

Much modern government depends on consultants. If a Council or the central government needs access to special knowledge or expertise on a temporary or one off basis, then consultants can be a good idea. There are some excellent lawyers, architects, surveyors, finance specialists and others that the state can hire to perform specific roles which it would not wish to employ full time at high salaries in a government department.

There can also be too many consultants. Consultants are bad value if they are hired to do regular work that could be undertaken by full time departmental staff more economically. They are bad value if they come in and seek to perpetuate themselves by making things more complicated than they need be, with a view  to creating a semi permanent role. I have come across this from time to time with transport and highway consultants. Many Councils today use these firms instead of having their own highway planners and engineers propose road schemes and then implement them. The consultants often wish to develop very expensive traffic models, then design schemes that can defy common sense. Sometimes these schemes get shot down by the democratic process before damage is done on the ground. Other times they are implemented, and can make the situation worse. Usually the consultants put in a traffic model  which then needs updating, offering them future work. If a Council does need a model then it should either create it itself, or buy it as a one off and update it itself.

There are rumours that a large number of very expensive lawyers and consultants are being hired to handle the Brexit negotiations. That is exactly what we do not want or need. There are MPs and think tanks who have studied and written extensively on EU matters who are happy to brief the officials being transferred into Brexit departments pro bono for free. I read that some of the consultants are busy working up the Norway option. Why?  The Leave campaign ruled that out at the beginning. There can be no compromise on freedom of movement. We just need to take back control – and soon.

During the many debates I did with the professional and business communities I was impressed by the lack of knowledge of the Treaties, the Directives and the institutional architecture of the EU shown by many of them. What is the point of having consultants if they have not read Lisbon or debated the Single European Act?

Today saw another strong rise in the FTSE 250 taking it back to near the year’s  high and the high level it reached on Referendum day.

When I pointed out how well the main large company Index the FTSE 100 did after the vote, the doom mongers said the FTSE 250 smaller companies was  a better guide to the future. so would they now like to write in and tell us why the FTSe 250 has done so well in July. Were they too pessimistic before?

People who are out to talk us down and into recession should get out more.

On Saturday afternoon I took some time off to go to the Globe theatre. I walked along the south bank to get there on a sunny day. It was extremely difficult doing so, as the generous walkway was crowded with people. At each of the attractions, like the London Eye, there were long queues to pay and visit.  The numerous cafes and restaurants were packed, even though I was not passing at a peak mealtime. When I and my friends did buy lunch it was a good job I had booked well in advance as the place was completely full.

The London I walked through is still a forest of construction cranes. A large building of very expensive new flats was  opening for occupation. I was told 80% of them are already sold, with the small starter unit costing an eye popping £800,000. That must be foreign  buyers still coming.  The tube is regularly overloaded, and not just at peak hours.

In Wokingham local  businesses tell me their turnovers are fine, and employment remains at very high levels. Estate Agents report a  brisk trade with many viewings and offers for properties at or around asking prices. The Wokingham traffic is as bad as ever, implying plenty of activity. Some of  commercial property funds which gated following an early rush for the exit, are now facing inflows from buyers and having to adjust their pricing upwards to take this into account.

With employment up, real wages up, interest rates down and money and credit expanding a recession is unlikely. Government borrowing rates have just got much lower, the FTSE 100 is up over the last month, and there is plenty of activity in the commercial property market. One company has just reported letting some remaining space in a City building at £100 a square foot.

The UK did not recently vote for a slightly beefed up version of Mr Cameron’s attempted renegotiation with the EU. We voted to leave, to take back control of our laws, our money and our borders. Those phrases were repeated throughout the Leave campaign, heard and understood by many, and approved by the majority of voters.

The rest of the EU is missing the point. There should  be no negotiation over taking back control of these important matters.  When the Conservatives lost the 2005 election – partly based on Labour’s lie of no more boom and bust – we did not try to overturn the election result, take them to court, or demand a re run! We accepted the verdict of the UK voters.

So far Mr Trump has got into the race and stayed in it largely by dealing with the darker issues of crime, terrorism and migration. The US and EU establishments dislike his rhetoric associating crime with migration and his policy of a border fence or wall with Mexico.

Mr Trump does have a more positive side. His tax plans are for a major tax cut for America. He proposes that no-one on an income below $25,000 should pay any tax. He recommends just 4 bands of tax at zero, 10%, 20% with a top rate of just 25%, making US personal income tax very attractive by advanced world standards. He wants to see a single 15% rate of profits tax for all businesses, with a one off lower rate to get US corporations to repatriate and profit and  cash sitting offshore. He would abolish the death tax.

These proposals gained only a passing reference in his Acceptance speech at the Republican Convention. If he starts to market these ideas more widely they could prove very appealing to many Americans. His tactic appears to  be to detach worried low and middle income democrats to his cause by offering policies to boost their incomes and lower their tax bills. We know that  many of them are not enamoured of Mrs Clinton, as they showed by their support for Mr Sanders in the primaries.

Mr Trump is also attacking head on the past US establishment’s policy of military intervention in the Middle East. Whilst he is not an isolationist, he may well find a fertile political territory of people who resent the loss of life and the money expended on foreign wars, when there is little settled democratic government in the affected areas to show for them.

There’s no let up in the efforts to talk the UK economy down. PMI rushed out a week early their July survey, with less than a full set of responses, to show that the confidence of a number of senior business executives fell when they got the result of the Brexit vote wrong. There’s a surprise!

These surveys have forecast recessions in the past that did not happen. Confidence took a nasty knock on 9/11 for understandable reasons but it did not lead to a recession. It would be surprising if many executives who by a large majority seemed to vote Remain suddenly expressed confidence a few days after losing the vote. As I discovered in the referendum campaign a large proportion of senior large company executives were keen to remain.

I suggest commentators and pundits calm down and await data on what actually happens June- October in the real economy. The signs I see suggest there will be no recession. Employment is at high levels, real wages are rising, and export intentions are up.

The Chancellor has said that he will await more data  and come to a judgement about the balance of the budget and economic policy at the time of the Autumn Statement in the normal way. I welcome that commonsense approach. If government borrowing rates remain at the new much lower levels we have reached in recent weeks post Brexit, he will have an immediate windfall in the form of lower future interest charges on government debt. He could use this to cut the deficit or to spend a bit more.  There is also the question of when will the government cease making financial contributions to the EU.  That money should be spent on our priorities, as argued here before.

There is no need to move to a government  surplus by 2020-21, unless the economy has by then  heated up too much and is in danger of going too fast. At current borrowing rates using some borrowed money for investment could make sense. It will be important to make sure the chosen investments do add to national wealth and income by being well thought through.