Author: johnredwood

One of the most significant differences between the  four main parties (parties likely to win more than 10 seats) is the approach to the European Union. The three left of centre parties all support our current membership, would be happy to see a continuing erosion of power as the EU passes more laws and gains more control over our lives, and are happy to pay a substantial contribution to the rest of the EU. The Conservatives argue that the current relationship is not working in the UK’s interest, that too much power has already passed to the EU, and we need a new relationship with them.

A Conservative government would recognise that the Euro area members of the EU will need to take more and more power to the centre, to add political, fiscal and budgetary union to their currency union. The UK has no wish to do that, and needs a new relationship with the Euro area as it emerges in a more centralised form. A Conservative government will seek to negotiate a new relationship based on trade and political co-operation. As Mr Cameron made clear in his Bloomberg speech, a central task will be to restore UK democratic accountability of government to Parliament. Voters will then have a referendum to decide if they like the new relationship or would rather leave the EU altogether. Those who are sceptical of the UK’s ability to negotiate a new deal without leaving, will be free to vote for Out. The presence of the referendum will provide a good incentive to the rest of the EU to negotiate, as very clearly they do not wish to lose all that money we pay in.

The other three parties would fail to address the real issues which are already upon us over our membership. As non members of the Euro we are finding that regulation and control of our large financial services and banking sector is increasingly under EU law and administration  in ways which can be damaging to business. We are finding it impossible to run a low priced energy policy thanks to EU energy rules, making  our wish to expand UK manufacturing more difficult to deliver. The EU wants the UK to stand behind the debts of the banks and states of the Euro area. We need to resist this. Any likely government  but a Conservative one will not stand up for UK interests, and will not seek to resolve the growing tensions between Euro and non Euro members.

This election will make a huge difference on the matter of our EU membership. There is only one chance now to vote for an In/Out referendum before many more EU shackles are placed upon us if we have a government formed from the 3 pro EU left of centre parties.

 

This week I am going to write a series of articles on what differences there might be depending on who governs after May 7th. The main media concentrates on the spin lines from the major parties, which tend to hype  differences. They follow the daily diet of mistakes, gaffes and set ups which characterise a modern media driven election. Some of these should not matter and are usually trivial and of no lasting significance. My objection to David Miliband was not that he once carried a banana, which many others have done with no harm to their reputations. My objection was his uncritical love of the EU. My objection to Gordon Brown was not his unfortunate facial expressions when waiting for an interview in a studio when tired, but the way his banking and economic policies put us into the most violent boom/bust cycle since the 1930s. These articles will ask what difference will there really be? What matters?

Labour have sought to put the NHS at the centre of this election. They mean by that health in England. This General election will make no difference to the way the NHS is run in Wales or Scotland, where it is a devolved matter under their Assembly or Parliament.

Labour claim the NHS is only safe in their hands. There are no grounds whatsoever to take this view. The management of NHS England say it will need an extra £8billion a year by the end of the next Parliament. The Conservatives and Liberal Democrats have both promised to find this. Labour has promised less, but I assume were they to be in office they would also find the money. The UK bureaucracy is usually good at extracting money for public budgets, and will doubtless make a strong case. It seems unlikely that there will be a lot of difference on total NHS England spending between the parties.

Labour say they will stop people making money in the private sector out of the NHS. They do not of course mean this in most cases. It was Labour who set up a lot of the most expensive PFI schemes when in office, encouraging the private sector to profit from providing new NHS facilities. They will not be able to get out of these. Any government will have to buy drugs and medical supplies from with profit companies. All will stick with the system that most GPs are private sector contractors to the NHS. The NHS has always been a mixed economy system, a partnership between leading pharmaceutical and medical supply companies, doctors under contract, and directly owned hospitals with state employed staff. No main party is proposing any change to this pattern.

Labour dictates the terms of the debate on health. This debate prevents discussion of reform or change. This has been a very conservative election on health, with all main parties competing to keep it as it is, with more money.

Conservatives have promised to recruit more GPs to offer longer opening hours and week-end service. This would help relieve pressure on A and E if more people could get an appointment with their GP to deal with the things that do not need hospital treatment. That would be a practical change to offer a better service to patients, and to save money at A and E departments. I conclude there would be little difference to the NHS whoever wins, but Conservatives do have an attractive policy of improving access to GP services which I think could be a beneficial change. It has also taken a Conservative Secretary of State in the coalition government to expose the problems in some hospitals properly that had occurred under Labour, and to get improvements.

 

 

As Labour left office in 2010 there were 2.5 million people out of work . There were 1.5 million claiming Job Seekers Allowance.  Today there are 1.84 million out of work, and 770,000 claiming Job Seekers Allowance. Employment has risen from 28.8 million to more than 31 million.

Most people now know the UK economy has created an additional 2 million jobs over the last five years. Fewer know that many of these jobs are full time, and many  of them have been taken by UK citizens who were out of work or just joining the workforce from school and college. The fact that people on Jobseekers Allowance  has almost halved is good news.

The figures are also a reminder that more needs to be done to help more of the remaining people who are  out of work into employment.

If we compare the UK with other countries in Europe, we can see that the UK has been one of the best performers, alongside Germany. The table beneath shows the problems in most of the larger EU countries, and in Greece, the worst performer:

Unemployment rate

Greece        26%

Spain         23.2%

Portugal    14.1%

Italy          12.2%

France      10.6%

UK             5.6%

 

Employment rate

Greece         49.6%

Italy              56.0%

Spain            56.8%

Portugal       63.0%

France          64.1%

UK                73.3%

Labour’s great banking crash and recession has tested political debate to destruction. Politicians,  parties and most in the media are happiest talking about a few billion of spending. To most people a billion is a lot of money, without having any precise feel as to how much. It is a lot of money, but it is also  just fifteen pounds each for every man, woman and child in the country. It is not a significant sum when discussing the UK economy. It is a small rounding error in the national accounts.

In this election the biggest annual sum argued over has been the £8 billion extra for the NHS. It hasn’t  been much of an argument anyway, as Lib Dems and Conservatives say they will pay it, and Labour in office would end up paying it. The largest individual sum is the misleading £100 billion   for Trident which is some kind of lifetime cost. On a similar time frame the NHS would  be  say £3000 billion. The actual cost of four new submarines would be around one quarter of that, spread over a number of years of building.

Yet as I have set out we are talking in theory of annual public spending of  £737 billion , rising to  £797 billion over the next Parliament on Conservative plans. There is little discussion of whether these are the right totals, and whether we get value for all that.

More importantly, the UK Parliament proved incapable of having good debates about the far more important large numbers which determined our economic crash in the 2005-10 Parliament or the progress to recover from it  in the last Parliament. The £375 billion of QE was worth more debate and examination than it got. The massive £800 billion of assets and liabilities removed from the balance sheet of the state’s own bank,RBS, was crucial to our economic progress.It was only when there was a change in policy towards RBS in 2013 that the economy started to improve more quickly.  It would be good if in the last days of this election campaign there could be some discussion of the big numbers that have a real impact, as well as debate over  the nice to have smaller sums that are important to particular programmes but do not have much impact on the economy as a whole.

Some times predicting is easy. You look at what happened when somewhere else tried something, and reckon the same will happen when your country does. With QE that may not be so easy. Japan has been trying QE for a long time. In their case inflation stays very low, output does not expand as quickly as they would like, so they just do some more. Japan has become the most heavily indebted of the advanced countries, as successive fiscal and monetary stimuli fail to inject inflation or supercharged growth into the economy. The government has racked up record levels of debt.

The high debt levels are less worrying than they seem for two reasons. The first is a lot of the debt the state owes to itself. Once issued, the Bank of Japan buy the debts back for the state with created money.  The second mitigation is the interest rates on the debt remain tiny, thanks to QE purchases of bonds designed to keep rates ultra low.
I suspect the US and UK are different from Japan. Both the US and UK economies are now growing more rapidly. There are signs of monetary growth without QE. Both economies have a past history of being prone to more inflation. The USA keeps talking about getting interest rates back to a more normal level.The UK has deferred any such plan, thanks to the collapse of commodity prices and the greater strength in sterling, limiting inflation for the time being.
The Fed and the Bank of England are rightly wary of moving too fast to raise rates and choking off recovery. They are also conscious that for the time being they are more likely to undershoot their inflation target and have to explain why, than to face an inflationary issue. The US recovery is more advanced and has been proceeding for longer than the UK one. The US commercial banks are now generating extra credit, and US money supply is now growing at 8% per annum. That should be pushing the Fed to earlier action on rates. It begins to feel as if the economy and the banks in the USA are more normal. 0.25% as a base rate is anything but normal. The UK will have the luxury of watching what happens when the USA does start to make her move to normalise. If, however, the UK had a change of government policy to increase spending and borrowing, the UK might find markets intervened and started to drive sterling lower which in turn would start to increase prices.