Author: johnredwood

It is unacceptable for one of the leading Central banks of the world to fail to tell people on what basis it will support Greek banks and get them open for business again.
It is the job of the ECB to supply Euros to Greek banks when people want to withdraw their money. It is their duty to allow external settlement of accounts from Greece to the rest of the zone and beyond. Greek business with money needs to pay foreign suppliers. If Greek banks are solvent as the ECB has always said they are, they must supply the cash. If a bank in the zone becomes insolvent, then the ECB must trigger its recapitalisation. Playing politics with the livelihoods of Greeks and undermining Greek businesses by failing to allow transactions is doing damage to the Eurozone as a whole as well as to Greece itself.

I hold this truth to be self evident. People are happier if they are self governing.
The choice for the Greek people was a simple one. Did they wish to sign up to another period of the same policies that delivered a cut of one quarter in their incomes and mass unemployment, especially for their young people, or did they wish to try something different?
We now know the Greeks by a large margin voted for their democracy. They voted for change. They voted against the policies a German led Europe has imposed on them. And yes, it was a vote against German influence, as the explicit posters of the campaign with pictures of the German Finance Minister and unflattering words made clear.
I think all should respect the strong view of the Greek people. If the Euro area wishes to keep Greece in the Euro it has to move swiftly to help. If it wants them out, it needs to tell us urgently how it can be done sensibly with least damage.
Those who still have something to lose, particularly those with jobs from the EU, may have voted for more of the same. Those who have already lost probably voted for change. Those who are optimists probably voted for something different, whilst some pessimists accepted the German led EU’s strictures. Those who believe in Greek democracy voted for their government and those who believe in the EU scheme voted for the deal which may be back on offer.
To some in Greece it was a vote for the dignity to disagree with The Euro bosses. For others it was a vote to conform, to show they are trying to be good Europeans.
This is a seminal moment for the whole EU/Euro project. As Greece votes No the EU has to rethink its approach to national democracies. Other nations will want and need the ability to change EU/Euro policies they do not like.
It is not a pleasant sight watching the group of Euro area Ministers and their Central bank gradually throttling the Greek economy by refusing it the cash it needs through the commercial banks. If these are solvent banks they should be sent the money they need. If a bank is no longer solvent it should be recapitalised under the agreed procedure. Any advanced economy needs a fully operational banking system. It is a prime duty of sovereign government to maintain a freely traded currency that allows all legal transactions.Why doesn’t the Eurozone do that?
If today the European Central Bank does not re-open the facilities for the Greek banks we will witness the extraordinary sight of the European Central Bank refusing to help damaged banks within its own zone, and refusing to behave as normal central banks as lender of last resort and provider of liquidity to commercial banks under its supervision. This may force the Greek state to issue its own money to pay bills and to re-open the banks.If the Euro area refuses early and urgent talks with Greece then it makes crisis more likely. It should also lead other members to ask what kind of a common currency is it, if people with deposits in banks in the zone cannot get their own money out, and if businesses in Greece with money are not able to pay their bills with other parts of the zone.

Before the Greek referendum the consistent message from the European Commission, the Euro group of ministers, and from the large Euro country governments was the same. The referendum was not about whether Greece should accept the last terms from the Euro group and EU or whether it should reject them. The referendum they said, was about whether Greece wanted to stay in the Euro or not.
Germany’s Vice Chancellor said on the record that a No vote was a vote “against remaining in the Euro”. The President of France said the vote was about “whether the Greeks want to stay in the Eurozone.” Signor Renzi of Italy said the vote was about the “Euro versus the drachma”. As they knew the Greek government and people wanted to stay in the Euro come what may and were not about to ask to leave, they were clearly saying they would drive Greece out of the currency if she voted No.
So how are they going to bring this about? Will they do it by a sensible agreement, keeping Greece’s banks going in the meantime whilst Greece sets up her own currency arrangements? Or are they going to do it the nasty way, by continuing to refuse the Greek banks access to more cash, in an effort to bring the Greek banks down in a hurry and force the pace of establishing a new Greek currency?
Or were these words all foolish hot air? Will the Euro area now meekly pay up, send Greece the money it needs to keep going, and sit down again at the negotiating table to try to come up with another compromise which is better for Greece than the last one on offer? If they do that, will they this time try and find a lasting solution, instead of more extend and pretend credit that does not tackle the underlying weakness of the Greek economy?
Which ever way, the credibility of the Euro bosses is gravely compromised by this dreadful situation they have helped create. If they decide to co-operate, lend to Greek banks enough money, help the Greek state meet its debts, and discuss changes of economic policy to try to get the Greek economy growing again, they will have to eat all the words they have spoken in haste in the last week. They send exactly the signal they wished to avoid, that if a country gets into a big enough mess they will be bailed out by the taxpayers of other states of the zone. If they continue to dig in and refuse to support Greek banks they may well drive Greece out of the Euro, after doing yet more damaged to the Greek economy. It is time they rose to their responsibilities. It is time they understood how democracy works. It is time they realised they and the IMF have lent too much already on the wrong terms, and have now to find a way out for themselves and for Greece.

We all agree we want to abolish poverty. The arguments about how to tackle poverty and low incomes in UK politics are not about the aim. All political parties and all sensible politicians want to wipe out poverty, want more jobs and better pay. Our arguments are about how you make that happen.

This week the government has ventured into the difficult territory of trying to define poverty. The World Bank says you are poor if you have less than $2 a day to spend, as that means you cannot afford the basics of food and shelter. They go for an absolute standard of poverty, where to be poor you go hungry or have no suitable home. In the UK most of the organisations who talk about poverty prefer to use a relative measure, so our definition of poverty is of a much higher basic required income so that people can assume a standard of food, clothing and housing related to the average that people in a rich country like the UK enjoy.

As one of the leading anti poverty charities puts it ” When we talk about poverty in the UK today we rarely mean malnutrition or the levels of squalor of previous centuries or even the hardships of the 1930s before the advent of the Welfare state. It is a relative concept”

Labour in office defined child poverty as living in a household with an income less than 60% of the UK average. This means in a recession as in 2007-9 when average incomes fall you can have the paradoxical effect that child poverty falls, though children in low income households are not themselves better off. Similarly, if we enter a period of faster income growth then children in lower income households can be better off but there could be more in poverty as defined if inequality rises as incomes rise.

The government is looking at a range of measures including poor educational attainment, long term worklessness in the household, drug and drink dependency and family breakdown to get to the bottom of which children are at risk or getting a bad deal. Do you agree with this approach?

The IMF has apparently come to two conclusions on Greece which the rest of the Euro area does not wish to admit. First, Greece will not be able to pay back all that she owes. Second, she needs another Euro 50 billion. Why then did the IMF lend Greece so much before with the pretence that it would work?
If Greece is to stay in the Eurozone she will need Euro 50 billion or more, to have enough cash for her banks to distribute and enough money for her government to pay its bills. In a normal currency zone this money would be sent to the poorer part of the zone and much of it would be grant, not loan. A city or county in the UK with low incomes and high unemployment does not have to borrow from the rest of the UK, but receives central cash to pay welfare benefits, pensions and local authority costs by way of grant.
If Germany wants to carry on with her currency zone then she has to accept that German taxpayers – and the taxpayers of other rich countries – have to fork out to pay for Greece. Greece, for its part, has to accept that the Eurozone can then settle its budgets and interfere in its government decisions.
It is deeply damaging to the Greek economy and people to go on pretending that Greece can pay her way locked into the Euro, and to pretend the European institutions can get all their money back with the agreed interest. After seven years of agreed programmes for reform and all that borrowing Greece is no nearer today to being able to repay than when it all started. So the rest of the zone must either pay up or tell Greece to leave. Outside the Euro Greece will become more competitive immediately and better able to pay her way. Her borrowing will then be limited by the market to levels she can afford.
the zone is cruel and unrealistic. It needs to tell Greece to leave, or it needs to pay up and take social responsibility for the unemployment and severe cuts it has helped create.

On Wednesday we were told by various media outlets that the 36 degrees recorded in some parts of the UK was a new record.

That’s strange. The Met Office’s own website shows a high of 38.5 degrees in 2003. It’s still nothing like the summer of 1976 when the temperature from 23 June to 7th July was always over 32 degrees somewhere in the UK – now that was a hot summer.

This week is not the first time rails have buckled from heat, nor the first time we have hit 36 degrees. I seem to remember it used to be thought very hot if we hit 100 degrees Fahrenheit, which is more than 36 Celsius.

Yesterday in the Commons we debated defence matters. The Secretary of State explained the actions UK aircraft are taking in Iraq, at the request of the Iraqi government. He raised the issue of whether the new Parliament would reconsider the position in Syria, and allow air strikes by UK aircraft there as well. Several of us advised against.

I share his revulsion at the actions of extreme groups in various parts of the Middle East. We all feel we want to take action to make an attack like that in Tunisia last week less likely. However, a mature well armed state needs to think carefully before committing to military action. It should always ask Is this a war we can win? If we win this war will there be a satisfactory peace that is better than the current situation? Can we win the war without doing unacceptable levels of damage to the place concerned, and without excessive loss of life, especially for non combatants?

The UK has had to counter domestic terrorist threats. The UK always sought to respond to terrorism at home under the rule of law. The authorities tried to locate terrorists, assemble evidence and prosecute them as criminals. This remains our approach to terrorists in the UK linked to Middle Eastern fanatical groups. In the Irish troubles the terrorists sought special political status. There were endless arguments about the use of force for self defence by the UK authorities and about the legal processes and the detention of prisoners.

To end the terrorist troubles in Northern Ireland successive UK governments, both Conservative and Labour, came to the conclusion that they needed to undertake a political process, engaging terrorist organisations in talks and finding a democratic answer to the conflicts within a troubled community. No political party in the UK ever advocated pursuing a war on terrorist organisations,authorising shooting or bombing by the state.

I raised the question of how the UK can contribute to a negotiated settlement in Iraq or Syria, and drew attention to the contrast between treating terrorism as a serious policing matter, and treating it as a war to be fought despite the terrorists being embedded in civilian communities of people who are not themselves killing others. The Minister reminded me that in the case of Iraq we have the request of the civilian authority and operate under that legal cover. In Syria we do not wish to be friends of the Assad regime, so there is no similar legal base for intervening in Syrian territory. The Minister implied that any intervention would be as a result of extending the remit from Iraq, chasing terrorists over the border who have been operating in Iraq itself.

I understand the frustration of many that we have not so far been able to stop some of the advances of terrorists in Iraq and Syria, though nor have we in Nigeria and other Middle Eastern countries where there is no UK wish to take military action.There are many other well armed powers in the region that can and do take action and know the local religion, culture and languages better than us.

The questions the government needs to ask are the ones in this piece. I do not see a way for the UK military to improve the situation in Syria by bombing. The UK should be neither on the side of the Sunni nor the Shia forces in this religious war. We should remember just how difficult it has proved to create a stable peace in Libya after taking military action. We should also remember our soldiers and air crews. Their tasks should be both feasible and legal.

Today begins a government journey to give some justice to England. The minimum required is a guarantee that England will not have to pay a higher rate of Income Tax than Scotland based on Scottish votes at Westminster, that England’s MPs have a veto over laws the Union Parliament wishes to impose just on England, and that England has more power to decide how to spend the money we raise in taxes which is the equivalent of the Scottish bloc grant.

This was something I highlighted last summer during the Scottish referendum campaign:

August 10 2014 post
“On Tuesday I am giving the McWhirter Memorial lecture at 7.30pm on HMS President, moored on the Victoria Embankment in London.

I will use the opportunity to make the case for England. If we assume Scotland votes to stay in the Union, the three main Westminster parties have promised more powers including powers over parts of taxation will be passed to the Scottish Parliament. This will be the time to recognise that England too wants and deserves devolved government, enjoying the same powers of self determination of laws, spending and taxes as our Scottish neighbours and friends.

I will ask Who currently speaks for England? Why do the EU and many senior politicians in the UK want to break England up into regions that we do not seek or recognise? Why can’t English MPs at Westminster make the decisions for England, and speak for England, in the way the Scottish Parliament in Edinburgh does for Scotland?

If we are revisiting Scotland’s settlement, we need to consider England’s at the same time. Many English people will not accept Scottish members of the Westminster Parliament voting through taxes on England that they do not have the power to impose on Scotland.”

I was delighted to read the Business Secretary’s speech to the CBI this week. In it he told them in no uncertain terms that if they continue to say the UK must stay in the EU come what may, they undermine the Prime Minister’s negotiations. He reminded them that in a negotiation you need to set out what you want, and to indicate that you will walk away if you do get a good offer. Business is for ever telling us they want to stay in a reformed EU, not the current EU. They should now tell us what reforms they want. They should also tell Brussels what reforms they want, and tell Brussels that people in the UK will vote against staying in if we are not offered solutions to the problems with our current membership.

At the base of the UK’s unsatisfactory relationship with the modern EU is the way in which the EU uses the so called single market as an excuse to regulate, legislate and interfere in a range of other important matters in ways which UK voters do not approve. The modern challenge for business is the way in which the demands of the Euro for more taxes, more financial controls and more business regulation are also spilling over into the wider EU. Big business does not like the banker bonus controls, the Financial Transactions Tax and the new banking capital rules from Brussels, though these may be popular with some voters. Nor does business like the results of the EU’s energy policy, with dear gas and electricity driving energy using businesses out of the UK.

The truth business needs to understand is that membership of the current EU is not a comfortable status quo that they can live with, but a ticket for a wild ride to political union which may do all sorts of things they do not want. The recent programme set out by the 5 Presidents of Euroland and the EU show just how central to the EU the Euro project has become. They want legally binding targets and controls on economies, a Euro Treasury, a financial union, and a political union. The UK has wisely decided not to join the Euro. Few business leaders want us to join the Euro. They therefore need to understand that any UK government now has to negotiate a new relationship with the emerging Euro state. We want to trade with them, be friends with them, have a range of sensible agreements with them but we do not wish to be governed by them.

It is an urgent task to get more business people to grasp that now we have an opportunity to free ourselves to be more prosperous, and to free the Euro area to get on with what it wants to do. The UK and our businesses do not wish to be drawn into a massive transfer union where we have to pay more tax to send to countries in the Eurozone that need more aid and support. That is why now is the time for business to tell us what reforms they need as we seek this change of approach.