Author: johnredwood

Yesterday the government published the latest quarterly figures for output and earnings to June 30^th 2015.

 

The UK economy is now producing 6% more than at the peak in early 2008 before the crash. The USA is producing 10% more, the EU just 1% more and Japan has the same output as Quarter 1 2008.  The UK recovery has been a steady one since 2009. The last annual figure shows growth of 2.4% , after 2.9% for calendar 2014. GDP per head is also now a little higher than at the pre crash peak, and rose by 1.9%  comparing the second quarter of 2015 with the same quarter the previous year. Japan’s stagnant output since 2008 is partly owing to population decline.

 

The best news in the figures is the growth in incomes and real incomes.  Compensation for employees is up by 4.7% in the last twelve months (Q2 2015 over Q2 2014), and real  disposable incomes rose by 2% just between the first and second quarters of 2015.  A greater feeling of job security for many, coupled with increases in earnings, is allowing service sector expansion and more retail purchases.

 

The figures once again remind anyone interested in the reality that public spending continues to rise. Government spending is up 0.4% on the previous quarter and 1.6% over the last twelve months, in real terms. The balance of payments improved sharply in the second quarter after a weak first quarter. Exports were up, imports down, and the current account deficit narrowed from 5.2% of National Income in the first quarter to 3.6% in the second.

 

Whilst the overall money supply figures show a small contraction in money, and no growth in lending to finance a recovery, the picture is of 4% growth in money (M4) adjusted for other financial corporations as the Bank of England likes to do. Lending taking out the other financial corporations was up by 2.3%. The Bank regards this narrower measure as a closer proxy for the real economy.

 

All this points to a steady performance. There is no great inflation threat as higher wages are coming at a time when productivity is improving as well, whilst the prices of imports and commodities remain weak.

It would be good if the political debate and interviews could be based around this factual portrait of the UK economy based on the official figures. More needs to be done to boost output, real wages and productivity. High energy prices remain a big problem, but we have a good base for further advances in employment and living standards.

Labour’s slogan from yesterday is one Conservatives can welcome as well. What was odd about the conference was the statement that Labour will not now stoop to personal abuse, and will debate in a grown up way. This was juxtaposed in the same speech with old anti Conservative rhetoric that was harsh and untrue. We had to listen to the lie that Conservatives seek to “protect the few  and to tell all the rest of us to accept what we are given.” That was a bit rich, when this government is all about getting more people out of low income and off benefits, by creating the conditions for more jobs and for better paid jobsand encouraging more home ownership.  One of the main themes of today’s Conservatives is to boost real wages and the productivity which underwrites them. Working smarter for more money is exactly what we are striving to achieve for the many.

I like the idea of a grown up debate. Could we start by all using the true figures of public spending, which show modest real growth in public spending over the last five years? Can we acknowledge that real wages are now rising and  more people are in work? Could Labour understand that demanding more homes for people whilst  demanding more migrants come to the country makes it difficult for housebuilding to catch up? Do they accept that more homes are now being built than in the later years of their government?

A grown up debate means recognising that  both Conservatives and Labour want higher living standards for all, and proper care and support for those who cannot support themselves. The arguments about means are important and can be fierce. Doubting people’s aims is not part of a new politics, but part of the old negative spin politics that many dislike, and which gets in the way of understanding.

I thought the bits of the speech that Mr Corbyn borrowed from Mr Heller were well written, but displayed their age from the pre kinder politics era. If you want a new kind of politics, it helps to write it in your own words and show us how it can be done. As readers here know, I seek to avoid abuse and dishonest statements of the attitudes and actions of others.

Labour’s patriotism is said to be British. Labour does not know where England is, and has a suite of policies to split it up and deny us a voice. When this morning the BBC analyst linked Labour’s patriotism to England it must have been a mistake. Others called it British nationalism. No one seemed to remember the UK is our nation state.

 

I will only believe Labour has changed from disliking England trying to stifle us when they change policy on England, devolution and regions. As Lord Mandelson wisely observed, the use of the patriotic words is just spin.

Not so long ago the Coalition government wanted us to vote for a war against President Assad of Syria. They were right that he is an unpleasant dictator, using excess force against his own citizens and failing to unite his country behind him. Some of us declined to support, on the grounds that many of Assad’s enemies were also people of violence, unlikely to bring good and fair government to the citizens of Syria. We did not wish to help bring down Assad by force, only to see something worse take his place. Without a strong moderate opposition and a winning political strategy for after the bombing it was difficult to endorse military action.

Now we read that the USA is thinking of co-operating with Russia, a power traditionally friendly to Assad and an opponent of extreme ISIL and related factions who oppose the Syrian regime. Mr Cameron says he still wishes to see Assad replaced if the west intervenes more on  the side of the current Syrian government against the ISIL and related insurgency. I can understand why.

This viewpoint requires more thought over who could replace Assad, how they could create a m0derate and effective government for Syria and how they could find some unity of purpose between moderate Sunni, Shia and Kurdish factions. The Kurds in the north will be looking for an independent Kurdish state. The Sunni groups will want reassurance that any new Syrian government will be fair between their interests and those of the Shia groups. None of this is easy politics.

Any UK bombing campaign would need to be planned in conjunction with troops from other countries on the ground. It would need help on the ground with identifying and checking targets to avoid loss of life of non combatants. It is difficult to see what extra the UK can bring to the long, vicious and tortuous Syrian civil war. UK forces should only be given tasks to do where there is a high chance of success and where their legal status is clear – unless our home country is under direct attack when you defend it come what may.

Meanwhile the US rhetoric towards Mr Putin has changed. He was a pariah when he exploited the western mistakes in Ukraine to take Crimea illegally. Now he is seen as a useful partner in Syria. He has been a critic of past western interventions which have so far failed to create peace and stability in several countries of the Middle East. Let’s hope this change of atmosphere between the great powers produces diplomatic and political initiatives that can achieve something in the cauldron that is Syria. This is a civil war that cannot be won by killing more people – it needs a political strategy for better government.

 

On Saturday evening at the Cambridge Union 200th anniversary debate on the EU there were signs of things to come. The pro EU side was to comprise 2 former continental senior politicians, and one unelected UK pro European in the Lords, with just one MP.  One of the 2 continentals pulled out at the last minute. Clearly there is a problem finding people prepared to argue the pro EU case. The anti EU side fielded two MPs who have been Cabinet Ministers , a senior businessman and the Deputy Chairman of UKIP.

The pro EU side had to argue that the EU was a success. Not a difficult task you might have thought if you believe in it and want a united Europe. Instead they conceded that the Euro was a shambles and implied the UK was right to be out of it. They accepted it was causing economic damage in much of the EU. They volunteered that the borders and migration policy had failed and needed radical change.

Rather as communists used to argue in the days of the Soviet empire, who always said when we criticised the Soviet system that it was not proper communism as they wanted it, they held up a view of an ideal EU. The EU they sought was  quite unlike the EU we currently have. In a sign of how the stay in side may argue in the referendum  it appears the pro side will join in with all the Eurosceptic criticisms of the current EU. They conceded the EU was too regulated, that it was doing economic damage, and that it did not control its borders. Their main argument was that we now have peace in Europe. When we pointed out NATO, US forces present for much of the post war period and the outbreak of democracy in Germany account for that, they agreed they were important. When asked about the violence  and conflict in the Ukraine and the Balkans a few years ago, they  disagreed on the EU’s unhelpful role.

None of them owned up to the 5 Presidents report, none set out a vision for a united Europe, none had the courage to explain why political union was essential to the project. What are they ashamed of? Why can’t they speak out for the United States of Europe which they must secretly want? I will go on reminding people the EU is on a wild ride to political union. Will none of the pro EU people in the UK defend it?

 

The audience who included various people who worked for EU and government institutions or in EU law, voted strongly in favour of the EU.

Hard on the heels of Nissan announcing a five year investment plan and a new model for Sunderland comes Vauxhall’s statement of its continued enthusiasm for plant and investment in the UK, with a new model here.

The BBC Today programme made as little progress in trying to persuade Vauxhall they should leave the UK if we leave the EU, as they did with Nissan. Vauxhall pointed out that they have an important car market in the UK that they wish to sell to. They argued that they assume there would be a satisfactory trade agreement with the rest of the EU if the UK decides to leave.

I am still waiting for the Today programme to ask about some of the advantages to business and voters of leaving the EU. It would be good if they abandoned their attempts to talk business people into wanting to cancel their links and investment with the UK were the UK to decide to vote to leave the EU. The BBC still seems reluctant to grasp that business invests in many countries all round the world that do not join the EU but trade very successfully with it.

The  campaign to get business to make the case to stay in the EU is not going well. Polls of smaller businesses shows over 40% wanting to leave, and more bigger businesses accepting they can prosper here out or in. Of course it should not primarily be a decision for business or about business. It is far wider, a matter of who governs and whether we still have a UK democracy. There is now comment from Greeks and commentators that the Greek election was largely irrelevant, because whoever won has to follow EU policies. The UK as a non Euro member is not in such a chronic position, but there are an increasing number of matters that a UK election cannot change thanks to our EU membership.

This evening I will be moving the motion in Middle Temple Hall in London for the 200th anniversary Cambridge Union debate. We will be debating the failure of the European Union. The debate starts at around 8 pm.

 

The VW clever computers helped engines pass the US exhaust tests. Now VW has apologised and thought better of such intelligent engineering, recognising that passing the tests was only meant to be an indicator of how  a vehicle would  perform when being driven on normal roads.

This tussle between manufacturer and regulator is one of many that occur when regulators demand certain performance, and when there are varying ways of conforming to the letter of the law. Many think companies should observe the sprit of the test and rules. Others blame the regulator for failing to invent a test which measures what they are really interested in.

This one, however, matters more than many for two big reasons. The first is VW is one of the world’s two largest motor manufacturers, accounting for more than 10 m vehicles out of a total world production of 90 million last year. VW exhausts have quite an impact on the world. The second is the output from car exhausts is of more concern to green groups than  practically any other source of carbon dioxide and pollutants, as green lobbyists are especially critical of personal transport whilst being less angry about home systems for heating ,cooking and washing that also use energy and produce pollutants.

The origins of this current controversy lie in the growing success of the global warming movement in the 1990s. They made regulators and lawmakers concentrate on carbon dioxide rather than pollutants. The diesel industry came up with good ways of cutting carbon dioxide output from vehicle engines, and in the process offered the motorist something he or she wanted – greater fuel efficiency. When I switched from petrol to diesel I gained more than a third in fuel economy from the switch. It was known at the time that older or dirtier diesels produced more pollutants including particulates, NOx and SOx. The Regulators set ever tougher standards to cut down these adverse side effects of going for the more fuel efficient diesel. The industry responded with much cleaner diesel engines.

Today the EU, governments and regulators have some explaining to do.  Did they do enough when they adopted aggressive carbon dioxide targets to police pollutants from engines? Did they set the right tests to make sure the vehicles performed as they needed? Can they now assure us they have in place the right tests, so when we buy a modern diesel we know for sure that it does achieve the high standards we expect in reducing or eliminating pollutants out of the back? And have they also set the right tests and made the right demands of petrol engines?

During this debate it might also be a good idea to look at domestic heating boilers and systems, and to remember just how much pollution still comes out of our power stations. Its total pollution which matters most. Regulators need to get a grip, and to see the volumes in proportion to the totals.

 

Amidst all the claims and counter claims of the two sides, there is one important fact. The UK will be £10 billion a year better off by not having to send that amount to be spent elsewhere in the EU as out net contribution. This will also improve the balance of payments by the same amount, and means a 0.6% of GDP gain or boost to our living standards.

Further gains are possible from changing and improving the regulatory burden which the EU imposes on all our domestic and n on EU trade. Whilst we would still want good quality regulations in various areas, we should be able to reduce the total costs of regulation and improve its effectiveness at the same time.

There should be trade and income gains from negotiating UK free trade agreements with major countries not currently covered by EU agreements, including India, China and the USA.

Above all, we will be spared the wild ride to political union. If we stay in the rest of the EU will expect us to pay more of the bills, as they move towards a benefits and transfer union around the Eurozone. The UK has found it difficult to contain the EU budget. In the next few years they will need to spend more on regional and development policies given the poor state of the least successful parts of the Eurozone, mired in mass unemployment.

Why the UK will be Better Off Out – Attachment: Better-Off-Out (1)

The debates this week in the EU have mainly centred over allocating 120,000 migrants to all the countries in  the EU save the UK. This has been a futile debate. It is quite clear far more than 120,000 people are bursting through the EU’s external frontier this year, so the agreement will be overtaken by far larger numbers long before it can be implemented.  It is bizarre, as the migrants the EU lets in will have views of their own on where they wish to settle. It will not be possible to make a certain number live in each country against their will.

It is causing more damage to a fractious EU. Several eastern countries have no wish to be part of this mismanaged invitation to migrants to come. Officials and some of the leading politicians have fallen prey to the “We must be seen to be doing something”, even if that something is unrealistic or unhelpful. The result has been to highlight again the conflict between central EU power and the wishes of some of the entrapped member states who disagree with the policy.

 

The non UK EU needs to make a simple binary decision. Is it going to restore full control, including choice of policy for borders and migration to each member state?  Or is it going to set an EU wide migration policy and take responsibility for the external border of the unified zone?  The EU largely has the powers it needs within the Shengen area to set a common policy on grounds for accepting inward migration. The issue is, does it have the good will and support of the member states to enforce this? Is the EU itself going to offer more resource to the weakest parts of its common border, in Greece, Italy and the Balkans? Can the EU enforce its extended borders?

 

If the EU now wishes to limit numbers to anything like the 120,000 it is talking about, it will need to send out a very different new message. It will have to announce that the non UK EU will impose strict limits on total inward migration. To do so it will define categories of people who can qualify through  asylum or other claim to gain legal entry. All others will be turned back at the border. It then needs to get on with enforcing its external frontier. In recent weeks EU leaders have sent out a wide range of differing messages, from a welcome to all through to tighter controls. Sometimes migrants have been offered free transport and passage, other times they have had to break through defended borders. No wonder the EU ends up in the current mess. It is not good for either the EU nor for the migrants.It lacks  certainty. It lacks principle. It lacks realism.