Author: johnredwood

This week I attended a presentation to a group of investment professionals in London about the world economic outlook by a leading strategy house with a U.S. Economist. This was a private event.

They examined at some length the possibility of a world recession before concluding there would not be one soon. Amidst all the possible threats that could cause one there was no mention of Brexit, nor did any of  the expert guests ask about it though there were lots of questions. It seems the wilder thoughts of the Bank of England do not even warrant discussion as people do not think it plausible.

I am one of the few MPs who foolishly will stand up for Investment bankers. I have no problem with them earning big money as long as they live by the market and financially suffer by the market if they get it wrong. I think paying them  bonuses in good times is a good idea, as long as these are removed in bad times, as that makes their businesses a bit more stable.  I don’t want any public subsidy or government guarantee. I do accept that at their best they do good work in financing projects and companies, in underpinning and helping create new jobs and activities.

I do find it odd that some of the foreign owned ones whine and whinge about the UK’s possible exit from the EU. The very essence of good corporate and investment banking is managing risk and change. They are usually ace at finding their way round rules without breaking any, outwitting lumbering governments and  bureaucracies, and avoiding tax legally. I don’t mind them piling in for Remain. As  they are so unpopular with many UK  voters I suspect their over the top dire  forecasts help the leave side and provide many with another reason to dislike them.

The new scholarship level question they wish Leave to answer is how will they manage without the passport system of access to the single market when we leave. There are four simple points to make.

The first is, why should we lose the passports? As Germany wishes to avoid a WTO 10% tariff on her cars she will see the reasonableness of  not altering arrangements that suit her in return for not altering arrangements that suit us. Why would the UK agree to ending the passports?

The second is even if they found a way of withdrawing the formal EU passport, under MIFID II any external country to the EU with equivalent financial regulations would be free to sell services and product in the EU. The UK will clearly qualify, as our regulations will be not merely equivalent but identical as most of them are now  based on EU law.

The third is the number of successful passported products is limited. The best example, used by the government, is UCITs investment funds. Practically all of these EU funds are domiciled in either Dublin or Luxembourg. So they will remain when we leave the EU. The UK will still be able to continue our contract work for these EU domiciled funds, which will  retain their passport status.

The fourth point is most of these grand Investment banks that complain have other subsidiaries around the EU in addition to their London office, so they will always have a brass plate address to qualify.

I have every confidence that these  bright and motivated people will flourish out of the EU in London. Some of the same people and their predecessors told us if we stayed out of the Euro they would all have to  move to Frankfurt or Paris. They didn’t and London did even  better by staying out of the single currency.

They may be bright and good at what they do,  but some of them do seem unable to grasp the simple realities of how the EU works and of modern politics.

 

(this item was requested by a reader)

Today the cost of government borrowing for ten year money has fallen to just 1.29%. Last November and even this January before  Brexit came to dominate much market commentary the cost of UK borrowing was over 2%. It is particularly noteworthy that as the chances of Brexit have risen in the polls and in the betting, so the cost of UK state  borrowing has fallen.

This is of course the opposite of the predictions of the Treasury and the US investment banks. They have been wrong again. UK public finances will obviously be sounder out of the EU, as we will no longer have to pay all that money to them. We will no longer risk being dragged into ever more expensive EU policies trying to offset all the economic damage Euro austerity does.

Last night I put the case for Brexit to a meeting attended by 200 people in the Willink School in Burghfield.

When the Remain side put some of their more absurd fears to the audience, many just laughed.

Project Fear seems to be backfiring.

Those parties the EU would destroy are first driven into coalition. In Germany the old rivals, CDU and SDP are in grand coalition. It is proving especially stressful for the SDP who now wish to differentiate from the government line in a number of areas. The anti Euro AFD is on the rise, rallying the growing number of voters who think the Euro and the open borders are not policies working in Germany’s interest.

The EU’s interference in law making, budget setting and much else is crushing the traditional parties in many European countries. The collapse of the two main rivals is at its  most pronounced in Greece, where the grotesque austerity enforced on the country has removed Pasok as a party of government  (Labour like) and badly damaged New Democracy (Conservative like). In both Spain and Ireland the two traditional parties that contend for power received only around  than 50% of the vote between them in recent elections, leaving their countries without governments.

In the UK being out of the Euro moderates the impact of the EU somewhat. Even here  the vote share of Labour and Conservative together has fallen, but last time there was still a small majority for the Conservatives. However, to get the many EU laws, taxes, budgets and measures through against the opposition of a large number of Eurosceptic Conservative MPs the government has had to rely on Labour and SNP votes, or on their abstention. This reliance is creating tensions within the ruling party and within the opposition.

Now we come to the referendum the same truth underlies the Remain campaign. They can only hope to win if Mr Cameron attracts a majority of Labour and SNP voters to his cause, as many Conservatives are strongly against the EU and its works.

Government coalitions tend to erode confidence and respect for main parties, as the parties have to dump manifesto pledges and compromise principles people thought they held dear. Though many say they would like parties to work together more and find more compromises, in practice the results of that are often perceived as being bad faith and untrustworthiness. This is intensified if the compromises are to accommodate laws and taxes imposed by the EU rather than ones stemming from large bodies of opinion at home.

There are many critics and criticisms of two party choice  democracy. I think it the least bad system.  The problem with  multi party democracy is it can so easily mean weak government or  no elected government, more bureaucratic and EU control, and more scorn for parties who are forced to renege on some their most closely held beliefs and cherished policies. The EU is a creating a crisis of government in its large area. Many people now object to EU policy but have no way of changing it, even when they change their own national government in an attempt to do so. It is also fuelling parties that want to split up their nations, encouraged by the Europe of the regions rhetoric and grant regimes.

I have been sent the results of the votes held at the Thames Valley Business Forum yesterday morning where I spoke for Brexit against a Labour MEP for Remain:

 

 

Arrival poll:-

 

OUT – 34%

IN – 43%

Don’t know – 23%

 

Exit poll:-

 

OUT – 58%

IN – 37.5 %

Don’t know – 4.5%

 

It shows the Business community does have plenty of supporters for Leave who see the damage the EU is doing to many businesses in the UK, or who like many of us want our democracy back.

 

Mrs Merkel tells us that you never get what you want if you are  not in the room, meaning as a full member of the EU.

So she seems to be telling the USA, China, India and the rest that as they are not members of the EU they will never  get what they want from Germany.

That’s not very diplomatic, and not a  good way to make friends.

Normal countries  build friendly relationships with other countries without seeking to put them under the duress of strict special legal structures.

She also seems to believe the UK has to join the Euro, as we are often not in the room on Euro financial matters.

Of course Germany wants us to stay to help her pay all the bills of this increasingly risky and expensive project.

When we leave I know she will be equally keen to keep all the very profitable trade Germany does with us . Then we will be in a new room negotiating as she seeks to retain the trade advantages Germany currently enjoys. The good news for her is the UK does  not want to impose new barriers on German trade with us.

The OMFIF debate drew an audience of 200 to Westminster yesterday.

The vote at the start of proceedings showed 68% in favour of Remain and just 29% in favour of leaving.

Following the debate, led by myself and Gerard Lyons for Leave, with Lord Adonis and Vicky Pryce for Remain, the vote was 38% for Leave and 60% for Remain, a useful swing of 8%

It demonstrates  that even with an audience of well connected establishment figures it is possible to sway opinion if we have a chance to explain our case properly. As latest research  shows, this was a far from representative audience, as Leave is doing well overall and is ahead in recent polls.

The Remain camp is clearly in panic mode. Donald Tusk tells us in future the EU should drop its plans for political union. Yet this is surely the same Donald Tusk who as one of the 5 Presidents wrote and published an official EU Report on the next steps to political union. This advocates a Euro Treasury and much greater EU integration.

 

So which Donald Tusk view is the right one? I still believe the 5 Presidents Report, which stays on the website and is official. The latest Donald Tusk speech is clearly just for the referendum campaign. Why did the media run it without pointing out the original Donald Tusk signed the 5 Presidents Report and does believe in much greater EU integration?

 

If Mr Tusk has truly recanted he should begin by withdrawing the 5 Presidents Report, and replacing it with a vision of a very different EU. That of course would require negotiating an entirely new vision of the EU with all the other Presidents, governments and grandees pressing on for much more EU government.

Now Vote leave is getting some coverage for the many positive things we wish to do for our country once free of EU controls, Norman Smith, Assistant Political editor of the BBC,  pops up to complain that it is as if Brexit is offering some kind of alternative government. He seems to think we are not allowed views on what we do once we are free. On the contrary. The whole point of seeking our freedom is to govern the UK better, spend our own money on our own priorities, set our own taxes and make our own laws. Of course the Leave campaign can and must set out what laws we wish to  change, what taxes we want to  repeal, what spending we will undertake once we are an independent country again.

The policy he most objected to was the new policy announcement of a quota system and points to control numbers of migrants. This approach is designed to be fair to migrants from the rest of the world as well as from the EU. Far from undercutting the present government, leaving the EU is the only way to have a chance of implementing the hugely popular policy of reducing net migration by around two thirds that helped the Conservatives win the last election. Brexiteers wish the government to keep its promise. We have come up with the means to do so. Far from overriding the Conservative Manifesto, we are helping achieve it.

He also seems worried that we want to abolish VAT on certain items. I have news for Mr Smith. Mr Cameron agrees that the tampon tax should go. His problem is the EU still will not let him do that. Again, Brexiteers come to the aid of the government by offering a way for us to simply abolish the tax.

Then there is the VAT on domestic fuel. The Conservatives in the last election campaigned for cheaper fuel, and for measures to boost the living standards of those on low incomes. What better way to achieve  b0th aims than to remove VAT?  We need to leave the EU to do so.

A post Brexit government will of course be different from a Remain government. It will be able to deliver promises made, and be able to boost public services and incomes of people at home when we get our money back to spend as we see fit. We do need to set out what we want to do, and a post Brexit government will need to implement the mandate of the referendum result. Post Brexit, if that is the people’s wish, the government will get on with the 2015 winning Manifesto as strengthened by the proposals mandated by the  Brexit vote.