Author: johnredwood

We were always promised that the taxes we pay are a matter for UK voters and their elected Parliament at Westminster, not for the EU to impose.  When governments were signing away our power to govern ourselves they knew they had to reassure us that they would not let Brussels tax us.

 

They lied to us.

 

Today the overwhelming majority  of MPs want to abolish the tampon tax. We do not see this as some luxury product that deserves a 20% VAT charge, but as a necessity that should not be taxed at all. Brussels tells us we cannot do that.

 

Most MPs do not want to tax green products. We think people should be able to cut their fuel bills by buying draft excluder, insulation materials and better boiler and temperature controls free of VAT. Under Brussels rules the UK Parliament put a 5% VAT on, as we were told there had to be some  tax on  these helpful products. Last summer the EU took the UK government to the European Court. That Court, sovereign in the UK, has instructed the UK government to raise the VAT rate on these products to the full 20% standard rate.  The government and official opposition have of course delayed doing this until after the referendum.

 

So what does Mr Cameron tell us about our inability to choose our own taxes? He told us that in his “new deal” the EU would legislate to change its VAT laws, so we could abolish the tampon tax. He implied it might also  help with the green products.  After the deal the EU duly came out with proposals to change VAT, so I read them full of hope of a better tax future. I discovered that once again the EU had no intention of helping the UK.

 

Their consultation document on the changes they wish to make to VAT over the next couple of years contains no mention whatsoever of the UK renegotiation. It does not say the UK now has some “special status” as Mr Cameron says allowing us to change our tax rates. Instead the firm legislative proposals in their document are to centralise VAT more and to make cross border collection stronger.

At the end of the document they ask if there should be more flexibility for member states on VAT rates. They conclude that this could damage the single market, and would require the unanimous consent of all member states and the European Parliament. A document with firm proposals to centralise VAT more with promised EU legislation to do so has no firm promise of legislation to give us the flexibility we need.

 

The perverse and undemocratic nature of EU tax policies is underlined by their approach to company taxation. In the UK many people and all political parties think large companies should pay the full corporation tax the UK Parliament wishes to levy. We need the money for public services , and have cut the rate to one of the lowest in the advanced world to make it more likely companies will invest and work here and so pay our taxes. The EU spends much of its time considering legal cases from companies trying to get tax back from the UK, or trying to avoid future tax payments. According to the Treasury the UK lost more than £7000 million from company tax cases in the last Parliament, much of it thanks to the European Court and its decisions. The Treasury forecasts we could lose more over the next five years, as there are plenty of cases in the pipeline.

 

If the Treasury loses a case in UK courts under UK law, Parliament can quickly fix the law to restore the intended positon. Parliament can always legislate to make the tax levied legal.  If the Treasury loses a case in the European Court, as it has been doing, Parliament has to fix the law in favour of the companies  bringing the case. We have to legislate to tax them less.

 

The UK Parliament grew up to stop the King taxing people unfairly, and to make the King deal with people’s needs and grievances before collecting the tax. Today the EU has taken the place of the King, the sovereign. Parliament needs to have the power to stop the EU imposing on people taxes we do not agree with, and needs to have the power to collect taxes from big business we do agree with.

 

No wonder so many large corporations think we should stay in the EU. The EU is cutting the amount of tax they have to pay, at the cost of the rest of us who then have to put up with VAT on fuel, on green products and on tampons.  We need to leave the EU so we can set the taxes we think are fair. We could also afford to abolish VAT on  fuel out of saved EU contributions. That welcome change to families is illegal if we stay in the EU.

 

(This has appeared on the Telegraph site)

 

A small country can be sovereign but not very powerful. A large country can be more powerful but not sovereign, if it is foolish enough to give away its right to self government.

Remain seek to confuse sovereignty with power. The UK they say is more powerful because we “pool” our sovereignty with other countries. What nonsense.

You cannot “pool” sovereignty. You are either sovereign or you are not.

I am sovereign over my bank account. I can spend the money in it as I please.

If I add up my neighbours’ bank accounts they have much more money than I do, so collectively they have more spending power. That does not make me want to share my bank account with them, even though together we would have more money to spend, or more power of the purse.

Why don’t people share bank accounts with their neighbours? Because they do not want to have to agree every purchase and every loan with all the others in the shared scheme. They fear they would end up not being able to spend their own money on their priorities. They fear they might have to carry a disproportionate burden of paying back any overdraft. People are wise not to “pool” their bank accounts.

So why do Remainians think it can work for countries?  We now share a lot of our money in a common budget with the rest of the EU. We do not get back anything like what we put in. The handling and admin costs are high as well.

It’s not just the money where this is obvious. Because the UK is in the EU it agrees to “pool” its sovereignty over trade. That means we have given away our unique vote and voice in the World Trade Organisation. We now have to argue with 27 other countries over what the EU representative will say on our joint behalf. Frequently they do not say or vote as we would wish.

All the time the UK stays in the EU we are not sovereign. The European Court overturns Acts of Parliament and controls taxes we have imposed or wish not to impose. The European institutions take over more and more areas for their own decision. We cannot decide how to raise all our tax money, nor decide how to spend it. We cannot make our own laws.

So a once powerful independent country is no longer sovereign.

Earlier this week I was asked by a Japanese tv channel why on earth we were wanting to leave the EU. I told them that I  noticed Japan did not enter a similar arrangement with China, and have to agree her laws, and parts of her budgets and taxes with China before making decisions. As they do not do this, why do they think we want to have to agree our laws and taxes with France and Germany?

 

The whole Remain establishment spends most of their time trying to invent more and more problems that they say will flow from a decision to leave. They tell us no country has ever done it, and argue it is almost impossible.

They lie, as they do about so much. Greenland left the EU without great hassle when she split from Denmark.

It is quite common for countries and big international groupings to break up. When a country splits far more has to be sorted out that we will need to deal with when leaving the EU. The currency, banking system and many common institutions have to be split, and the whole government divided. The Czech and Slovak peoples  achieved this well in a matter of months in 1992 when they decided they wanted to live in  individual countries. It took less than six months to get from the declared intent for independence to the legal separation of the two, with  transfer of assets and the  establishment of two new independent governments.

The break up of the USSR was also achieved quite quickly, despite the reluctance of many in the Russian dominated Soviet Union to cede power. Every country leaving set up its own currency, quitting the rouble bloc, and soon established functioning all purpose governments to replace the subsidiary administrations they had been allowed. They also had to introduce democracy at the same time. Each one became considerably more prosperous on leaving, despite losing the alleged advantage of a single currency and common trading system. It took under two years for the whole rouble bloc to be disbanded by the countries other than Russia each setting up their own money and quitting the zone. Political separation for any individual country was a swift process.

The  UK successfully helped pilot through independence in its imperial countries after 1945. Many of them went on to become more prosperous and to become successful democracies. India is the world’s largest democracy and the fastest growing major economy today thanks to her own efforts freed of foreign rule.

Singapore was expelled by the state of Malaysia in 1965 after just a year of political wrangling and protests. Some in Singapore were worried lest the state was too small to flourish alone, yet she  did so nonetheless and never looked back, rapidly becoming one the world’s wealthiest small countries.

So why do Remain have such a low opinion of the UK, that they think we cannot do much less than any of these had to do, and do it in a friendly, orderly and prompt manner? Why didn’t Singapore end up poorer or the Cech Republic encounter insuperable legal and trade obstacles, when it dared to leave Czechoslovakia? Name a single country that regrets leaving the USSR.

The Treasury’s long term forecast for 2030 is absurd. Mr Cameron now tells us he does not have a forecast for how many people there will in the country by 2030 if we stay in the EU, so how can he defend a forecast of  how big our National Income will be?  Why did the Treasury use the wrong number of people when trying to work out GDP per head figures and then pretend these were family income figures?

The Treasury’s short term forecasts have so far proved simply to be wrong. Remain says that fear of Brexit and then Brexit itself will

Raise interest rates

Lower the pound

Push us into a shallow recession

Since the end of February the polls have moved considerably in favour of Brexit. Where the City and markets thought in February Brexit had no chance of winning, now many think Brexit could win. So how has the Treasury forecast fared?

 

Interest rates (government bond rates) have fallen considerably.

The pound has gone up against the dollar and other currencies, and our foreign exchange reserves have risen.

Retail sales and manufacturing output have b0th risen encouragingly in May as the polls narrowed.

 

So there we have it. The Treasury so far has been wrong, wrong and wrong.

They also have been busy contradicting themselves. At the same time as telling us interest rates will go up, their Governor of the Bank of England favouring Remain tells us he stands ready to cut official short rates further on Brexit.

So what does Leave think?

We think the pound and interest rates have gone up and gone down during the long period we have been in the EU, and will doubtless fluctuate when we are out of the EU. Over the  rest of this year US rate changes and other major international events will doubtless affect the value of the pound, but there is no good reason to expect major change to either rates or the pound from Brexit itself. As recent output and retail figures show there is certainly no reason to forecast the temporary end to growth if we vote leave.

The French are floating the idea of a pan EU naval force to patrol the South China Sea in response to China’s creation of artificial islands  and use of the Spratley islands to extend its influence and military presence beyond its narrower domestic waters.

The Chinese action is contested by other regional powers and by the USA. It is difficult to see why the EU needs to get involved militarily in  this matter when the USA and regional powers are trying to sort this out and have made clear they intend  to stand up for free access to these waters by all wishing to trade or go about their legitimate business.

It is apparent  from this intervention and from hostile rhetoric and foreign policy stances  that are  a daily part of EU life that  many in positions of power do wish to see a tougher EU on the world stage seeking influence like the USA and gradually adding military power to back up its attitudes. Far from helping the peace or promoting stability, this seems to me to be a further force for instability.

The main EU nations are also members of NATO. Nato is a known force in the world, led by US military  might. Surely it is the best way of allowing European countries who wish to do so to work alongside the USA and make common cause about any international problem  or challenge any country who invades or disrupts another, as we did with the liberation of Kuwait.

The danger of the EU’s increasingly noisy interventions is that they are not backed by sufficient force to make them credible, but they  can be diplomatically disruptive, as we saw with the EU/Ukraine Association Agreement. Pushing for military and security co-operation with Ukraine as part of that agreement was treated as a provocation or an excuse by  Russia to seize the Crimea which the EU was impotent to prevent.

My advice to the EU is keep out of the China Seas militarily. If the USA and the regional powers there need help from EU countries with navies, NATO would be the obvious body to add European naval capability to the region under a combined command with the USA.

Mrs Merkel’s intervention in the EU referendum debate was the one I wanted. There’s  nothing like a bossy German telling us what to do to mobilise the Leave vote.

Her intervention was at one with many of the absurd predictions and threats that characterise so much of the Remain campaign.  She told us we will get a better deal by being in the room, meaning we have to be a member to be able to do things we want with the rest of the EU. She clearly has no sense of irony.

The UK has just tried out the proposition that if you are in the EU you can get a sympathetic hearing for your needs. So how did Mr Cameron get on?

He wanted to control free movement to hit his immigration targets. He was told by Germany not to even ask for change on that, so he didn’t. The solemn and popular promise to the UK voters to control immigration does not matter to the EU.

He wanted to stop us having to pay Child Benefit t to children who do not live in our country. He was told we still have to in the EU.

He wanted to stop paying in work benefits to recently arrived EU migrants, asking them to work for four years before being entitled to such money. He was told this was impossible, and offered a modest change for a transitional period only.

He wanted to stop the movement to ever closer political union. He was told there might be some Treaty change to that effect in future, but in the meantime the UK daily loses powers to the EU as they merrily continue issuing more directives, regulations and court cases pursuing their objective of more centralised power.

As you will see, all those demands which were roundly rejected  could all be achieved by leaving the EU.

I remember in the run up to the formation of the Euro I was asked to various lunches, dinners and meetings with powerful Germans. They had heard of my books, articles and campaign around the country to keep us out of the Euro, and thought they could persuade me to change my mind.

The conversations always started pleasantly enough. They thought I might be intelligent enough to see how right they were about the need for the single market to have a single currency and how it would  be best for business. As the event wore on and I doggedly held to my forecast that the Euro would create either boom or bust or both  in various countries as the Exchange Rate mechanism had done, their tone would change. They would then seek to bully me, telling me I was wrong. The City they said would be at risk and outside the Euro the UK would have no influence.

I feel this Merkel intervention is in the same spirit. Deja vu all over again.

 

Amidst all this unreal talk from remain about possible future damage to business if we dare to leave the EU, there is a stunning silence about all the damage our EU membership has already done to many  businesses. Remain claims to have perfect foresight over future damage if we leave, but complete memory loss over all the actual known damage done by staying in.

 

The other day I was asked by a remain supporter what he thought would prove a difficult question. “Mr Redwood, which of EU regulations do you think are damaging and would you like to repeal?”

Where do you begin? How can you compress the long list into a short answer?

We can all agree the rules and regulations of the single currency are not for us, though keeping out of some of them is difficult. Remain has total amnesia about the recession and huge damage to  business the EU’s Exchange rate regulations did to  us in the late 1980s.

Remain is usually silent about our fishing industry. An island  nation with one of the world’s richest fishing grounds when we joined the EEC/EU has lost much of its industry under the rules of the common fishing policy. We are reduced to importing our own fish, plucked from our seas by foreign vessels. Out of the EU we could regulate our own fishing grounds and catch more of the permitted catch in UK vessels.

They are not that keen to talk about our steel industry either. Labour in the 1960s made a massive investment in a 45 million tonners a year industry, with five large modern integrated plants paid for by taxpayers. Sine we joined the EEC/EU we have seen continuous decline, to an industry of under one quarter the capacity we had on entry in 1972. EU rules on steel trade, energy prices and state aids have helped bring us to this sad situation. The German industry, still at 43 million tonnes of output, has fared much better with a regime for cheaper energy and state support which is deemed legal when we struggle to get help or permission for us to help  from the EU. EU policies have driven us to much more import dependence for steel, including having to import the steel for our submarines.

Then how about our electricity industry? EU regulations have turned a productive relatively low cost generator into a high cost one. EU energy policy is forcing us into more import dependence through interconnectors to the continent where before we were self sufficient.

 

When we joined the EU we produced 4% of the world’s aluminium. Today it has practically all gone, thanks to plant closures brought on the EU’s dear power policies.

 

Industry by industry the EU has damaged us and assisted industrial decline. If we were in charge of our own rules and spending plans we should do better.

The desperate Remain campaign have been predicting higher interest rates if we leave.

Why then have official interest rates plunged since January whilst expectations of Brexit have risen?

 

(10 year official bond rate fallen from 2% around the opening of the year to 1.29% on Friday)

There is one feature of the Treasury’s ludicrous forecasts for 2030 that I agree with. They reckon in our out of the EU the UK will be better off in 2030 than today. Given the rate of technological change and the ability to work smarter and better in the years ahead, it would be surprising if we were  not better off.

The issue in dispute is will be even better off if we leave or stay?  2030 is too far ahead to be sure. Whichever route we choose, we will never be able to answer that question definitively, as the country can only live one of the two options. I do think it more likely we will be better off out, for the many reasons I have set out in recent weeks on this site.

It is easier forecasting the next two or three years. Forecasting the next fifteen is just about impossible. Will China be the world’s largest economy in 2030, still growing well, or will there have been a China crisis as some fear? Will there be major new breakthroughs in technology, or will still be adapting and using the main internet, materials and biotechnologies we already know about? Will the world comfortably absorb the huge supply of potential labour from the poorer countries, or will there be difficulties in spreading wealth and incomes more widely?  Will political tensions in the Middle East, in the China Sea and elsewhere remain contained?

It seems likely that if we leave the EU we can look forward to a better pay rise at the bottom end of the pay scale than if we stay in. Lord Rose, the Chairman of Remain, said as much in a rare honest forecast from that campaign. Assuming a post Brexit government does take control of our borders and impose sensible and effective controls on EU migrants wanting to come to take low paid jobs, we will remove some of the downwards pressure on wages.

We will also have £10bn a year to spend at home that we have to give way to EU in contributions we don’t get back. This will enable us to hire more people for the NHS and schools who will tend to be better paid people with more skill. This also helps boost UK family incomes as we train more nurses, doctors and teachers and get them into employment.

There is also the stimulus effect of the first post Brexit budget, spending that money and removing VAT on fuel to increase  people’s spending power. That too will boost incomes and help create more jobs as the money circulates through our economy instead of being paid away. The left has often called for more so called fiscal stimulus. They want the state to spend more to create activity and jobs. That is exactly what we can do if we reclaim our own money to spend on our priorities.

 

(A longer version of this has appeared as an article in City am)